ELSS vs ULIP: Which Is A Better Tax Saving Investment For 2019-20?

| March 6, 2019

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Income tax can not only reduce your take-home salary, it can also put a dent in your investment returns. That is why you need to consider a well-thought out investment plan that can boost your earnings and help you attain your investment objectives. Equity Linked Savings Schemes (ELSS) and Unit Linked Insurance Policies (ULIPs) are the two very popular tax saving instruments. Now, although they both allow you to save taxes under Section 80C of the Income Tax Act 1961, they are two very different products that serve very different purposes. The question of which is the better one requires careful deliberation of their features, benefits and costs. In this article, we will break the two down, study their pros and cons and accordingly conclude which is the better-suited tax saving instrument. What is ELSS? Equity Linked Savings Scheme is a category of mutual fund that gives investors the dual advantage of capital appreciation and tax saving under Section 80C of Income Tax Act, 1961. ELSS mutual fund investments are primarily made in equity and equity-related instruments, thus offering better returns compared with some of the other tax-saving instruments like PPF, EPF and NSC. Another advantage of this investment plan is that it comes under the 'EEE' category, which means that the amount you put into an ELSS fund, the dividend you earn and the amount received at maturity are all exempted from tax.

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