ELSS Vs ULIP? Which would be the best option for the tax saving? Both of these products are designed for the tax saving. Both of these products invests in the equity market
ELSS, ANY given day!
Between ELSS and ULIPs, only ELSS can truly be called as an Investment. ULIP is wrongly sold as Investment. Infact, I'd go out on a limb and say that ULIP has single handedly destroyed investor wealth in our country. ULIPs are a loot!
ULIPs = Investment + Insurance is LESS than Investment and Insurance done independently.
They have a bunch of hidden charges and conditions delivering significantly poor returns. Watch this sting operation by Bloomberg that reveals some hard hitting truths about ULIPs.
ELSS is an Equity mutual funds which invests primarily in shares or shares related investments
ULIP is insurance-cum-investment product. One part goes towards insuring individual whereas other part goes towards investments. One can choose investing in Debt or Equity related products
Amount Invested in ELSS can be withdrawn any time.
Money invested in ULIPs can be withdrawn only after 5 years of investment
The tenure ranges from three years till any time period as per choice of investor in case of ELSS
The minimum tenure is 5 years in case of ULIP. Investor can choose maximum tenure as per his or her choice.Insurance is not an investment. It is neccsary to have pure term insurance for secure future of you and your loved ones. Therefore do not mix investments with insurance.
ELSS Vs ULIP: Your Confusion
The Equity linked saving scheme seems better but very few people are talking about this. No one is there who can say with conviction that ELSS is the best tax saving option.
Whereas, the agent is taking guarantee of ULIP. He is giving the full assurance. He will be there to assist. It has given good return recently. Also, one can escape the market downturn. Insurance is free of cost.
For most of the people I always recommend the equity linked saving scheme. ELSS are transparent, charges reasonable fees, easily understandable and investor friendly.
The ULIPs mix the insurance and investment. It promises to give you the benefit of both worlds, but it benefits only to the insurance agent and company. You never get the clear picture of your investment and insurance. You should avoid it.
It is all from my side on ELSS Vs ULIP. Now it is your turn to add on.
[In this post I have discussed the ELSS Tax Benefits. I have told the rules of ELSS (tax saving mutual fund). I have also compared the ELSS with other tax saving investments]
As your income increases, the need of Tax Saving also increase. Higher the income greater the income tax rate. But, we do not want to give away our hard earned money in the taxes. Every one of us wants to minimise the income tax.
Fortunately, The government has given us legal way to cut the taxes. There is a wide spectrum of investments which can be claimed for the tax benefit. The Equity Linked Saving scheme i. e. ELSS is one such investment plan which gives you the tax benefit.
Most of the investments including ELSS, which gives us the benefit of tax deduction comes under the section 80C of the income tax Act. The investments specified under this section are eligible for tax deduction. It means the amount, you have invested in these specified investments can be used to reduce your total taxable income. If your income of Rs X is eligible for tax and you have invested Rs Y on the tax saving investments, your total taxable income would become X-Y.
However, you can’t claim more than Rs 1.5 lac under section 80C. Your taxable income can’t reduce more than Rs 1.5 lac because of the tax saving investments.
So, there is an upper limit on tax benefits. Along with this, there are other conditions as well. These conditions vary for every type of investments. This makes some tax saving investments better than the others. The Equity Linked Saving Scheme has got the favourable condition, which make it a better tax saving investment.
Tax Saving Through ELSS
Lock In Period of ELSS
Lock In Period of ELSS SIP
Lock In Period of ELSS
Lock In Period of ELSS SIP
The investment in ELSS is eligible for tax deduction under section 80C. You can getELSS tax benefit up to Rs 1.5 lac. This investment of Rs 1.5 lac can save tax up to Rs 46,350. This tax saving of Rs 46,350 is for those who are in the 30% income tax bracket. For 20% income tax slab it is Rs 30,900 and For 10% slab it is 15,450.
What do yo think? ELSS is profitable or not? Let us understand the rules related to theELSS Tax Benefit.
The government gives tax benefit on many investments, but all these tax benefits come with a lock in period. You can’t pull out your investment before a certain period. For ELSS, This lock in period is 3 years.
Is it a long duration?
Well, let me tell you that it is the shortest lock-in period among all the tax saving investments.
Systematic Investment Plan (SIP) is a method of investing. The regular investment of fixed amount is called as SIP. You can also invest in ELSS through the SIP method.
But, investment through the SIP creates a confusion. What would be the lock-in period of the ELSS SIP? Would it be the three years from the beginning date of SIP? Or would it be 3 years from the End date of SIP?
This confusion arises due to the lock in rules of EPF, PPF and Recurring deposit. In the EPF, PPF and RD the lock in is counted from the start of contribution.
But, in the ELSS, Every contribution has its own lock-in period. It has no relation with the start date of SIP. It means the last SIP contribution would remain locked for another three years. I have given below an illustration of a 6 month SIP.
