Investment Guide

ULIP vs ELSS – Choose the Best Saving Scheme Suits You

By admin
28 October 2024
3 mins read

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ULIP vs ELSS – Choose the Best Saving Scheme Suits You

ULIP and ELSS are tax saving investment options that are often pitted against each other. ULIP or Unit Linked Insurance Plans refer to insurance plans that offer life insurance coverage with the opportunity to make market investments.

ELSS stands for Equity Linked Saving Scheme and is a type of equity mutual fund. With this, a part of your investment is directed towards equity-focused securities. These are managed by professional fund managers.

If you’re unsure of which one to choose for your investment portfolio, you’re in the right place. This article explores both these tax saving investment options by comparing the two to help you find the one suited to your needs.

Difference Between ULIP and ELSS

Here is a concise table for you to analyse ULIP and ELSS’s differences and compare them.

Criteria	ULIP	ELSS
Objective	This offers investment return with tax relief and life coverage	It is a professionally managed fund that offers the benefit of diversified equity investments.
Returns	Returns vary as investors can choose any combination of debt, hybrid, or equity funds in their investments.	These are market-linked and so returns depend on the scheme. That said, an investor can expect 12-14%
Lock-in period	5-year lock-in period	3-year lock-in period
Applicable Charges	Premium allocation charges, mortality charges, po licy administration charges	Fund management charges and exit load charges
Regulator	ULIP plans are regulated by IRDA	ELSS funds are regulated by SEBI
Loyalty Additions	Loyalty additions are offered under the policy for remaining invested through the entire tenure. The loyalty additions depend on the policy’s conditions.	No loyalty additions
Transparency	These are managed by fund managers.	These are completely transparent, and investors can track their performance periodically.
Risk	These are less risky than ELSS.	These are riskier and are suitable for aggressive investors.
Liquidity	Low	High
Taxation	Tax benefits of up to Rs 1.5 Lakh according to Section 80C of the Income Tax Act 1961. The tax on returns is only added if the premium is 10% of the sum assured	Tax benefits are offered under Section 80C of the Income Tax Act 1961. A Capital Gains tax is applied when the return is greater than Rs 1 Lakh

ULIP vs ELSS: Which One Suits You?

ULIPs are unique and are the only investment option that offers life insurance coverage benefits while simultaneously growing your money through market returns. That said, ULIP returns can be low due to multiple charges and steep commissions of fund managers.

On the other hand, ELSS offers higher returns with a shorter investment period. Further, you get more transparency with ELSS as it allows you to check the fund’s performance in real time.

To Sum Up

As we’ve discussed above, both ULIP and ELSS have their benefits and drawbacks. While ULIPs offer the dual benefit of insurance and investment, ELSS are best suited to those looking for a short-term investment with quick returns. You need to consider your unique financial and investment goals to find the one that you should choose. And once you have your answer, the only thing left to decide is which financial platform should you choose for your investment management. For this, consider Tata Capital’s Moneyfy. With us, you get your portfolio in a click, hassle-free investing, and a safe way to grow your money.