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What Is The Difference Between ELSS And ULIP?

While both ULIP and ELSS offer good market returns, figuring out which investment speculation is best for an individual's long term monetary objectives can be troublesome. Prior to settling on the two speculation decisions, ensure your monetary objectives are lined up with the different plans, and afterward pick the arrangement that best addresses your issues. This article provides a relative analysis to help you in making your determination.

What Is The Difference Between ELSS And ULIP?

1. Based On Returns

Under ULIP plans, the returns funds may vary due to the flexibility investors exercise in choosing to invest in any combination of equity, debt, or hybrid funds.

Due to ELSS (Equity Linked Saving Scheme) being market-linked, the returns vary for every scheme, but investors can expect a return of 12 percent to 14 percent on average.

2. Based On Tax Benefits

The money invested is tax deductible under Section 80C, but the earnings are taxable.
A tax deduction of up to Rs 150,000 can be claimed on the amount invested in ULIPs under Section 80C of the Income Tax Act.

An investor can invest any amount of money in an ELSS. They can also claim a tax deduction of up to Rs 1,50,000 for ELSS investments made in a financial year.

It is the finest tax-saving investing option since it provides both tax savings and the opportunity to achieve better returns while having a short lock-in period

3. Lock- In Period

ULIP plan have a mandatory lock-in of 5 years. Whereas, ELSS has a shorter mandatory lock-in of 3 years

4. Flexibility And Transparency

ULIPs allow you to switch between funds with ease. This means that, depending on market conditions, you can switch from equity-oriented to debt-oriented funds and vice versa.
Transparency is often lacking in ULIPs. This is due to the fact that determining where your money is invested is tough.

There is no flexibility in switching funds in an ELSS. The full sum is directed towards equity funds.

The Equity Linked Savings Scheme, however, is fully transparent. The investors can have a thorough understanding of where the money is invested and how to grow the fund to get greater returns

5. Based on Investment Goals

ULIP plans function as multipurpose plans and cater to the dual benefits of savings and investment.Initially, the ULIP premium is used to cover policy costs and your insurance requirements. 

Following these deductions, the premium is split between providing you with a life insurance policy and purchasing investment fund units.

ELSS on the other hand, is an equity fund, making it a perfect option for higher returns along with saving taxes. It does not provide an insurance cover to the investor and hence is not suitable for that purpose.

Endnotes

Both plans originated from different investment goals and cater to the slightly different requirements. While ULIP plans provide both insurance and savings benefits, ELSS encourages tax savings.

Despite their flaws, the two ideas operate admirably. Flexibility is promoted by ULIP plans, although transparency is lacking. ELSS, on the other hand, provides complete transparency to investors.

To arrive at a final decision, bear the following differences in mind, as well as your investing goal.

Also read - How To Invest In Equity Through ULIPs?

All About ULIPs vs. ELSS

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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