Home Finance Is Kotak Life ULIP Plan a better investment than ELSS in tax savings?

Is Kotak Life ULIP Plan a better investment than ELSS in tax savings?

by Conor Adan

Unit Linked Insurance Plan (ULIP) is a scheme that offers the twin benefits of insurance and investment. So, the monthly premium you pay goes into both life cover and investment funds. On the other hand, Equity Linked Savings Scheme (ELSS) is a diversified, tax-saving equity fund that invests your total amount in equity-based instruments in the capital market.

Now, in both these cases, you get good tax exemptions as per the Income Tax Act. Your aim is to get good returns and not only to save taxes, right? So, which one should you choose to save more on taxes and earn better returns? Read on to find the answer!

Chief advantages of investing in ULIPs vs. ELSS

Tax benefits:

Under Section 80C of the Income Tax Act, when you invest in Kotak e-Invest Plan, you get tax exemptions up to Rs.1.5 lakh. Moreover, the returns are taxed only if the yearly premium is 10% of the sum assured. The insurance payout that your nominee gets also has tax exemptions. So, this triple level tax protection is a lucrative benefit of ULIPs.

On the other hand, under Section 80C of the Income Tax Act, your investment in ELSS also gets tax exemptions up to Rs.1.5 lakh. Around 10% of the capital gains tax is applied on the returns in case the returns exceed Rs.1,00,000.

The returns:

Now, let’s talk about what investing in a fund is all about – the returns. In an ELSS fund, the risk typically ranges from moderately high to very high. It is a market-linked investment, and the risk profile varies accordingly.

When it comes to ULIPs, the returns can increase based on the kind of funds you choose throughout the tenure. So, if you can get the right mix of equity, debt, and hybrid at the right stages, you can get pretty good returns.

Choosing between ULIPs and ELSS: Which is better?

Both ELSS and ULIPs are all about investing an amount in the stock market and sharing the returns with the investors. There are tax benefits offered in both cases. However, it is important to consider that when you invest in Kotak e-Invest Plan, you also get the benefit of insurance. With an ELSS, there is no insurance component. So, even if you keep the tax benefits apart, many investors readily choose ULIPs simply because of the added advantage of insurance.

To sum it up, it would not be right to call one form of investment better than the other because it all depends on your financial goals and risk appetite. If the insurance component looks lucrative to you, go for the ULIPs by all means. It will help secure your future and offer financial protection to your family in your absence. And if you are not looking for life insurance, you can give ELSS a thought. If you find it hard to choose one, talk to your bank or financial advisor for guidance.

Visit here to know more about Kotak Life ULIP Plan: https://www.kotaklife.com/online-plans/ulip-plan

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