Choosing the right investment strategy can be daunting, with numerous options available. Compound interest, resilience to financial crises and the ability to achieve long-term goals are some reasons to choose financial instruments like ULIP and ELSS.
Both ULIP and ELSS are considered top saving schemes for those who wish to make long-term investments. Understanding their unique features and benefits is crucial to making an informed decision for your long-term financial goals.
In this guide, we will dive deep into ULIP vs ELSS comparison to help you make the right choice.
A ULIP, also called a Unit-Linked Insurance Plan, is a type of financial instrument that combines the benefits of a life insurance plan and an investment.
In ULIP Plans, a part of your invested amount is used to offer life coverage and the rest is invested in equity, debt, or hybrid funds. The choice of funds depends significantly on your risk appetite.
ELSS, also called an Equity-Linked Savings Scheme, is an open-ended mutual fund that invests in equity and equity-related instruments.
This investment option is particularly famous for its tax-saving benefits and its potential for high returns. However, it is important to note that it is suitable for those open to high-risk investments.
Let us understand the main difference between ELSS and ULIP.
| Parameters | Unit-Linked Insurance Plan | Equity-Linked Savings Scheme |
|---|---|---|
| Regulatory Body | IRDAI: Insurance Regulatory and Development Authority of India | SEBI: Securities and Exchange Board of India |
| Performance/ Returns | The returns generated by the ULIPs entirely depend on the investment option you choose when buying the plan. | Like ULIPs, the returns are not guaranteed due to the volatility of equity and equity-related instruments. |
| Level of Risk | Risky, however, it depends mainly on the type of fund selected. For example, investment in debt funds is less risky than in equity-oriented funds. | High-risk as the performance depends on the market. |
| Lock-In Period | 5 years | 3 years |
| Charges | Relatively higher as there are different ULIP charges (such as premium allocation charges, fund management charges, mortality charges, etc) applicable. | Lower as compared to ULIPs. |
| Taxation on Investment | Tax exemption under section 80C of the Income Tax Act: Exemption up to ₹1,50,000 is allowed for the premium paid for ULIP in a year. Tax benefits will not be applicable if the total premium paid in a year is more than 10% of the sum insured. | Tax exemption under section 80C of the Income Tax Act: Exemption up to ₹1,50,000 is also allowed for the invested amount in an ELSS. |
| Tax on Returns | Tax exemption under section 10 (10D): Death benefits or maturity amounts are exempt from tax, provided that the total premium paid in a year falls below ₹2,50,000. | According to the recent Budget 2024 update, a long-term capital gain tax of 12.5% will be applied to ELSS instead of the earlier 10%. However, there has also been an increase in the annual LTCG exemption limit from ₹1 lakh to ₹1.25 lakh. |
| Liquidity | You can surrender the policy only after the completion of the lock-in period. | You can sell the units on the exchange once the lock-in period ends. |
| Switching Facility | You can switch your funds to other investment classes, such as equity, debt, hybrid or balanced. | You cannot switch the funds after the lock-in period. |
| Surrender Charges | Applicable | Not applicable |
| Benefits | Offers three benefits, including return on investment, tax deductions and a life cover at an affordable rate of premium. | Helps build wealth and tax benefits. |
When discussing ULIPs vs ELSSs, both are preferred investment options offering high potential for returns and tax advantages. If you are looking to buy a ULIP plan that suits your needs, PNB MetLife has a variety of options tailored to meet your financial goals and provide peace of mind.
From ULIP schemes designed for retirement and wealth accumulation to life insurance plans like the Century Plan, PNB MetLife offers comprehensive solutions to meet your financial needs.
ULIP can be good for the long term as it offers dual benefits of insurance and investments. The long-term horizons help in capital appreciation and offer the benefit of the power of compounding.
Under section 10(10D), the maturity benefits earned after the policy is held for more than 5 years are exempt from tax. However, the premium paid must not exceed 10% of the sum assured.
Piyush Kataria, SEO Manager at PNB MetLife, is a seasoned digital marketing strategist with over a decade of experience in optimizing websites for search engines. His expertise extends to keyword research, content strategy, technical SEO, and link building, all of which have been instrumental in driving organic traffic growth at PNB MetLife. With a strong foundation in life insurance, Piyush leverages his industry knowledge to create targeted and effective SEO campaigns.
Sakshi Malhotra is a seasoned marketing professional associated with the Life Insurance industry since 2007. At PNB MetLife, she heads Digital Marketing and Direct to Customer line of business. She is responsible for driving effective customer engagement through the company’s website and social media channels. In addition, she drives customer online buying journeys to help them buy the right product.
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
PNB MetLife India Insurance Company Limited
Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka
IRDAI Registration number 117 | CIN U66010KA2001PLC028883
For more details on risk factors, please read the sales brochure and the terms and conditions of the policy, carefully before concluding the sale.
Tax benefits are as per the Income Tax Act, 1961, & are subject to amendments made thereto from time to time. Please consult your tax consultant for more details.
Goods and Services Tax (GST) shall be levied as per prevailing tax laws which are subject to change from time to time.
The marks "PNB" and "MetLife" are registered trademarks of Punjab National Bank and Metropolitan Life Insurance Company, respectively. PNB MetLife India Insurance Company Limited is a licensed user of these marks.
Call us Toll-free at 1-800-425-6969, Phone: 080-66006969, Website: www.pnbmetlife.com, Email: indiaservice@pnbmetlife.co.in or Write to us: 1st Floor, Techniplex -1, Techniplex Complex, Off Veer Savarkar Flyover, Goregaon (West), Mumbai – 400062, Maharashtra. Phone: +91-22-41790000, Fax: +91-22-41790203.
| Beware of Spurious Phone Calls and Fictitious / Fraudulent Offers! IRDAI or its officials is not involved in activities like selling insurance policies, announcing bonus or investments of premium. Public receiving such phone calls are requested to lodge a police complaint. |
Rs. 930 Crores
Bonus declared for Participating Policies in FY’23-24
2.35 Lakh+
transactions completed on the khUshi chatbot.
99.20%
Claim settlement ratio for retail business
16500
Locations & strong branch network
Get Trusted Advice
Ask khUshi
Hi! I’m khUshi. How can I help you?
