Save tax without any hassle, when you have this ‘secret investment’ in your portfolio

The much-dreaded tax season is around the corner, and if you, like many others, are fretting and fuming over your choice of investments, we are here to help you. When you plan your financial journey, tax-saving forms an integral part of the picture. You could earn a high income, but if this component is missing, you could end up paying more taxes than required. Moreover, proper financial planning also goes a long way in wealth creation.

There is no dearth of investment options available today, but which one must you pick when it comes to saving tax and creating wealth? Your best bet would be a Unit-Linked Insurance Plan, or ULIP, as it is commonly known. What makes this financial instrument different from others is its dual advantage — it offers the assurance of investment and insurance.

When you make payments under ULIP, a part of the investment goes for insurance, while the remaining is invested in financial instruments with assets from other policyholders. The assets can be picked based on your financial goals and risk appetite.

What are some of the tax benefits of ULIPs?

By now, we have already established that ULIPs are a great tax-saving option. But what is it that makes them the preferred choice:

If you have invested in a ULIP plan, you can enjoy a tax deduction of up to Rs 1.5 lakhs on the premiums you pay towards your policy, under sections 10D and 80C of the Income Tax Act, 1961. If your policy continues for a duration of five years, you also have another advantage: exemption on taxes.

As part of any ULIP plan, the maturity proceeds that you receive when your policy ends are exempt from tax, as per section 10 (10D) of the Income Tax Act, 1961. But here’s a condition: the premium MUST be less than 10% of the sum assured, in case the plans have been purchased after April 1, 2012. Moreover, the premium that you pay towards your policy is also eligible for a deduction under section 80C of the Income Tax Act, 1961, up to Rs 1.5 lakhs annually. The death benefit is also exempt from tax, in case of the demise of the policyholder.

If the policyholder passes away during the duration of the ULIP policy, his/her family has the assurance to receive the sum assured along with the returns that have been generated by the plan. The payment that they receive is exempt from tax.

If you are looking to withdraw a partial amount invested in your ULIP plan, be rest assured that these will not attract any taxes, after the lock-in period of 5 years. The only condition here is that the amount you withdraw MUST not exceed 20% of the fund value.

In case you feel that your investments aren’t adequate, you can also choose to top up your ULIP plans. These are also eligible for tax deductions under sections 80C and 10D.

Choosing the right ULIP plan

Amid the sea of ULIP plans available today, it’s hard to make the right choice. But a plan like HDFC Life Click 2 Wealth offers you all the benefits in one plan, making it easier for you.

As part of this plan, you can take your pick from three options:

Invest Plus that helps in wealth creation and meeting your long-term goals
Premium Waiver option, wherein your future premiums are paid by the insurer in case of death of the policyholder
Golden Years Benefit option that provides life cover till 99 years of age

As a policyholder, you also receive these benefits:

Choose from 11 funds to maximise your investment
You can switch between fund options at any point, and n number of times
No more worries about incurring additional charges: all you need to pay are fund management and mortality charges
Avail a special addition of 1% of the premium allocated to your fund for the first 5 years
All future premiums will be waived off, in case of the death of the policyholder. The policy will continue to be operational.
Systematic withdrawal of funds for a secure post-retirement life
In case you opt for the Premium Waiver option, mortality charges towards the life assured will be refunded
You could opt for riders based on your requirement: Income Benefit on Accidental Disability or Critical Illness Plus Rider

The last word

With a slew of benefits offered by HDFC Life Click 2 Wealth, there’s no reason for you to delay. It’s time to provide an impetus to your financial journey, so that you don’t just save taxes, but also create wealth in the years to come. After all, every drop makes an ocean!