Comparison Between ULIPs and ELSS

This is tax saving time for the people in India. There are quite a few, who want to know the difference between ULIPs and ELSS as an investment option since both of them offer the option of equity exposure and tax saving under Sec 80C of the Income Tax Act. Thus, here is the clarification of the different parts of both ULIPS and ELSS the items featuring the striking contrasts of the two with the goal that you can settle on your venture choice admirably.

1. TYPE OF FUND

1. ULIP: ULIP is referred to as a Unit Linked Insurance Plan. It is a sort of disaster protection spread in which the approach’s money esteem changes, in view of the current net resource estimation of the basic speculation resources. With the assistance of ULIP, you can put your measure of money in debt, equity funds, and a mix of both debt and equity funds.
2. ELSS: ELSS or Equity Linked Savings Scheme is primarily a mutual fund scheme run by Mutual fund companies. In ELSS, you can put your money in equity funds only. No alternative to putting resources into debt funds here.

2. OFFERED BY

1. ULIP: Sold by Insurance companies only.
2. ELSS: Sold by Mutual Fund companies only.

3. LOCK-IN PERIOD

1. ULIP: Lock-in period for ULIPs is 3 years.
2. ELSS: Lock-in period for ELSS too is 3 years.

4. CHARGES

1. ULIP: Charges are quite high. Companies charge as high as 30-35% of the premium as charges. The charges are higher in introductory years and afterward drop down.
2. ELSS:Charges are relatively lower in ELSS at 2-2.5% of the speculation made. The charges are commonly level.

5. INSURANCE

1. ULIP: It has an insurance component besides investment.
2. ELSS: It may or may not have the insurance component. A large portion of the mainstream ELSS in the market don’t have the protection part.

6. RETURNS

1. ULIP: In ULIP, returns are lower when contrasted with ELSS. However, the actual return is a function of the market. Therefore, it is safe to believe that ULIPS will provide 8 to 9% returns for equity funds in 10 to 15 years of the time period.
2. ELSS: In ELSS, the returns are higher as compared to the returns in ULIPs. Equity Linked Savings Scheme likewise relies upon market powers. Consequently, you can accept a profit of 12 percent for the valuable assets in a time of 0 to 15 years.

7. TAX BENEFITS

1. ULIP: Rs. 1 Lakh under Section 80C.
2. ELSS: Rs. 1 Lakh under Section 80C.

8. WITHDRAWALS

1. ULIP: In ULIPs, withdrawal is possible after the maturity of the plan. However, in some plans, withdrawals may be possible at specific intervals of time. For knowing the withdrawal schemes, you have to get information about the various types of policies.
2. ELSS: In ELSS, withdrawals can be done any time after 3 years of making the investment.

Now, if you are wondering about which plan to opt for. Let’s answer the basic question. ELSS is the clear winner over ULIPs simply because:

1. ELSS has low charges as compared to ULIP.
2. ELSS offers superior returns in the long term due to its low-cost structure and it also offers you the same tax benefit.

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