ULIPs and Other Tax-Saving Options for Your 30s

The 30s are the most financially transforming years of life. Your career is almost set, income is steady and you have learned much about your goals, savings habits and investment needs. This is also that time of life when your family responsibilities are catching up with you and new financial goals are emerging.

This is also the time when you need to seriously consider tax implications of your long-term investments and vice versa. Therefore, here we talk about the right tax-saving plans available for you.

Best Tax Saving Investments

Tax saving is a regular exercise with your tax liability rising every year. Also, it is not something where you want to spend a lot of time every year. So, you need to use tax-saving investments in a way that they continue for a long-period and demand less attention from you.

Fortunately, most tax-saving investments are suitable for long term investment as almost all of them have a lock-in period for withdrawals. Also, the best tax-saving investments will provide the following three exemptions:

• The investment amount is tax-exempt
• Interest paid out or credited in the investment is tax-exempt
• Maturity proceeds are also tax-exempt

Such investments are also called EEE investments, meaning exempt investment, exempt interest and exempt maturity value.

EEE Tax Saving Investments In India

Fortunately, in India, we have several EEE investment options. Each of these investments offers different risk-return profiles and features. Some of the most popular EEE investments are:

• ULIPs (Unit Linked Insurance Plans): A unique life insurance plan with feature-rich investment options
• PPF (Public Provident Fund) & SSY (Sukanya Samriddhi Yojana): Similar tax-saving profile, except you, can only open SSY if you have a daughter. SSY is a great way of accumulating wealth for your daughter.
• NPS (National Pension Scheme): NPS tier-I account is a dedicated retirement investment plan. NPS gives your retirement savings a boost of equity market allocation and age-based portfolio management plan. On maturity, you need to convert at least 40% of the total corpus to pension.
  Must Read - How To Invest In NPS Online
• ELSS (Equity Linked Savings Scheme): ELSS is a tax saving investment for aggressive investors. ELSS is a pure equity mutual fund with 36 months of the lock-in period.

What Makes ULIPs is the Best Tax Saving Investment?

As you can see ULIPs is not the only investment with EEE tax status. So, what do ULIPs offer that sets them apart from other equally tax-efficient investments?

Here are the unique aspects of ULIPs which sets them apart:

1. Invest as per Your Risk Appetite

You can allocate your investment to multiple funds based on your risk appetite and comfort. This feature of ULIP is especially useful when you are investing for more than 10-year period.

You can allocate your funds into equity, debt, liquid and balanced funds. The best part is that allocation to any of these funds or switching between the funds during the policy period does not attract tax liability.

2. Use Professional Portfolio Management Strategies

ULIP investment plans offer multiple fund management strategies for you to manage your investment in the plan. You can use these strategies to automate your asset allocation and benefit from the market opportunities.

Automated portfolio management strategies give you better control over your asset allocation without losing the tax-efficiency.

3. Safety for the Goal

ULIPs are a type of life insurance plans, and insurance means financial stability. On the same principles, Promise4Growth Plus ULIP plan protects the financial goal for which you started investing. The plan receives all remaining instalments from the insurer in case of your early demise and the corpus continues to grow.

Your family will receive the maturity value to meet the goal as you originally intended. This feature makes ULIPs one of the best options to fulfil your child’s education and marriage goals.

Also, if you use ULIP plan to save for your retirement you protect your spouse from inadequate retirement corpus in case of your early demise.

4. Boost Your Portfolio

ULIPs are one of the best investments for long-term investors. Investors who regularly invest in ULIP plan for more than five years can receive bonus units. Promise4Growth Plus plan from Canara HSBC Life has two such boosters, which enhance your portfolio value over time.

The longer you stay invested in the plan the more benefit you receive from the boosters.

5. Financial Safety for Family

ULIP is a life insurance and thus, it goes without saying that it has a life cover component as well. The life cover works so far as:

• Your total investment in the plan or fund value is less than the insurance cover, or
• You have selected the goal protection option

If you have opted for the investment to continue as intended after your demise, your family receives the sum assured of the policy as death claim. After the sum assured has been paid out, the investment continues till maturity.

However, if you only chose the death benefit in the plan, ULIP will stop after paying the death benefit to the family.

Lock-in Period & Other Benefits

ULIPs also carry a lock-in period for withdrawals from the plan, like all other tax-saving investments. The lock-in period is of five years in ULIPs. However, the death benefit is still payable.

You can withdraw part of total available funds from the ULIP after the lock-in period is over. So, in a way despite being a long-term investment option, ULIPs give you enough flexibility to use your money.