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Do ULIPs Come With Tax Benefits?

Published On Dec 25, 2021 10:00 AM By InsuranceDekho

United Linked Insurance Plans (ULIPs) are one of the most tax-efficient investment vehicles available today. It can help you develop wealth as well as safeguard your family with life insurance. It's rare to find an investment program that offers all of the advantages of a ULIP.

ULIPs (Unit Linked Insurance Plans) are safe investment options that allow you to keep your money in a safe place. It's a method of accumulating wealth over time. Staying consistent and rotating between funds is the only way to maximise ULIP returns. The only two ways to secure your future are to save and invest.

Do ULIPs Come With Tax Benefits?

To learn more about ULIPs and how they can help you save money on taxes, continue reading.

  • Tax-Free Premium 

You must pay premiums to the assurer while purchasing ULIP coverage. You can use a ULIP Return Calculator to figure out how much money you'll make on your investment and how much you'll have to pay in premiums. Your premium will be invested in various avenues and a life insurance policy will be created for you by the assurer. However, under Section 80C of the Income Tax Act, ULIPs allow you to deduct the premium amount you pay. You can get up to Rs. 1.5 lakhs in tax relief.

  • Maturity Benefits Aren't Subject To Taxation

The maturity value you get on your ULIP is likewise tax-deductible under the ULIP. In India, this advantage is limited to a small number of financial options. You are exempt from paying tax on the capital you receive when the insurance is completed under Section 10(10D) of the Income Tax Act. The premium amount must, however, be less than 10% of the ULIP's total assured to qualify for the tax exemption.

  • Death Benefit Isn't Taxed

In the event of the policyholder's death, the beneficiary will receive a death benefit as well as income generated by ULIP funds. Section 10(10D) of the Income Tax Act exempts this lump-sum assured death payout from taxation. It means that the beneficiary will receive the entire sum in your absence, allowing them to deal with financial issues.

  • Withdrawals Aren't Taxed

You can make partial withdrawals from ULIPs following a 5-year lock-in period. These withdrawals are tax-free. However, keep in mind that this option is only available for partial withdrawals, and the total amount removed cannot exceed 20% of the fund's total value.

  • Tax Relief On Top-Ups 

By purchasing extra top-ups with your current insurance, you can improve your ULIP returns. If you have a surplus amount to invest in the funds, the insurance provider will allow you to purchase top-ups. Top-ups are eligible for tax exemptions under Sections 80C and 10(10D) of the Income Tax Act.

  • Saving Tax On Capital Gains 

You are likely to pay Long Term Capital Gains (LTCG) tax if you profit more than Rs. 1 lakh from shares, Equity Linked Savings Scheme (ELSS), and Equity-based mutual funds. The gains earned by ULIP funds, on the other hand, are tax-free. This offers ULIPs an advantage over other types of investments.


When you invest in ULIPs for the long term, you can take advantage of greater tax exemptions and save more money. Because premiums are tax-free, keeping a ULIP is a good long-term investment. Investing in a tax-advantaged ULIP will allow you to make a lot of money. In order to maximise your savings, you must remember the tax exemptions while filing your income tax returns.

Also read: 

Why ULIPs Are For Wise Investors?

Mistakes You Should Avoid While Purchasing ULIPs

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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