After the Union Budget 2020 introduced the new tax slabs, you can choose between two tax structures. If you wish to select the new tax regime, you might not be able to claim a deduction as per Section 80C of the Income Tax Act, 1961. With Section 80C, you would qualify to claim Rs. 1,50,000 on your taxable income.
While you might decide to switch to the new structure, a hasty switch decision might not be the right choice to reduce your tax-saving investments. Although the new tax regime can allow you to receive more liquidity, there can be specific investment tools, such as a Unit Linked Insurance Plan [ULIP] that has emerged as a clear winner after the new budget announcement.
Let’s understand how a ULIP investment can let you reap the benefits of the new budget announcement:
A ULIP plan is a financial product, which offers dual-benefits on the two essential things mentioned below:
Investment & insurance
A ULIP policy can be a dual combination of investment and insurance under a single roof. While the investment element can let you participate in the equity market, the insurance component can safeguard your family members in your absence.
Section 80C & Section 10(10D)
A ULIP policy can provide you with tax benefits on premium and maturity proceeds according to Section 80C and Section 10(10D) of the Income Tax Act, 1961. While you can be eligible to claim a deduction up to Rs. 1, 50,000 on your taxable income in accordance with Section 80C, your insurer can provide you with a tax-free payout after the maturity period based on Section 10 (10D).
If you pick the new tax regime, here’s how a ULIP investment can be favourable for you:
- A ULIP investment can be exempt from the Long Term Capital Gains (LTCG) tax, which can make it possible for you to benefit from the new tax structure.
- A ULIP policy can allow you to invest in equity funds as well as debt funds, without any applicable tax on switching between these two funds. With this, you can grow your wealth due to the dual benefits of insurance and investment.
There are various uses of a ULIP policy. Apart from dual-benefits, you can achieve the following objectives with a ULIP policy:
- Accumulation of wealth with the help of the long lock-in period and the benefits of the power of compounding
- Obtain better returns based on your risk appetite and investment goals
- Build a retirement corpus for a smooth retirement period in the future
- Fulfill your life goals, such as buying a new house or a car, funding your child’s education, planning your child’s dream wedding, and so on
If you want to fulfill the above-mentioned objectives, you should invest in a ULIP policy. Purchasing a ULIP policy can be simple. While offline purchases can be time-consuming, an online ULIP policy can be convenient, hassle-free, and affordable. Let’s take a look below to buy a ULIP online:
- Select a ULIP policy on the online platform of your insurer
- Make the online premium payment
- Purchase the selected ULIP policy
As highlighted above, ULIP has emerged as a clear winner amongst the rest of the investment tools, such as Mutual Fund (MF), Equity Linked Savings Scheme (ELSS), and so on after the budget announcement. While the new tax regime would come into effect from April 1, 2020, choose a ULIP investment since it can be applicable under both the tax slabs.