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Unit Linked Insurance Plan or ULIP and Equity Linked Savings Scheme or ELSS Mutual Fund are one of the investment options that helps an investor get income tax benefit on investing in long-term. Both are market linked but ULIP is mix of both debt and equity while ELSS Mutual Fund is 100 per cent market linked. Both investment tools may help an investor to get 12-15 per cent (approx.) return if the investment is for 20 years or more. But, an investor must know that there are some differences in both investment options.
Tax Saving:
When it comes to tax saving, both are tax saving investment options but in ELSS mutual funds, one can get income tax exemption on up to Rs.1.5 lakh investment in single financial year while in the case of ULIP, the Government of India has made it Rs.2.5 lakh.
Lock In Period:
In ULIP there is five year lock-in while in ELSS mutual funds lock-in period is three years."
Investing Methods:
ULIP is mix of both debt and equity while ELSS mutual fund is 100 per cent equity investment.
Tax On returns:
ULIP maturity amount is 100 per cent income tax exempted while ELSS mutual fund maturity amount requires Log Term Capital Gain or LTCG Tax.
Fund Management Charges:
In ULIP's entry load in early phase of investment is high as it requires fund management charges along with the insurance premium payment. ULIP is an investment-cum insurance plan where the investor is insured. But, in the case of ELSS mutual funds, there are only fund management charges that one needs to pay.
Investing Options:
Investor has an option to choose debt or equity or both while investing in ULIP and has the option to switch even during the lock-in period. Apart from this, one can increase or decrease one's equity or debt exposure from zero to 100 per cent depending upon the market movement. So, ULIP gives an option to maximise one's returns when the market is moving upward while it also helps an investor to minimise one's loss when the market is on the sliding note.
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