As part of the Union Budget 2018, the Government of India announced that Long-Term Capital Gains (LTCG) tax will be re-introduced for mutual funds. Thus, individuals who earn a profit of over a lakh through sale of equity mutual funds and listed equity shares will have to pay a 10% tax. As a result of this move, unit-linked insurance plans or ULIPs, which combine the benefits of a life insurance cover and an investment instrument, have become a popular choice for investors off-late.
Unit-linked insurance plans, also known as ULIPs, are a type of life insurance product that in addition to providing the life assured a risk cover against death also gives them the option to invest in mutual funds, bonds, or stocks, as per their appetite for risk. Thus, a part of the premium that is paid for a ULIP will go towards securing the life cover, while the remaining will be invested in funds as per the policyholder’s choice.
Unit-linked insurance plans are an ideal choice for any individual looking for a life cover that will also serve as an investment tool. That being said, before deciding whether to invest in a mutual fund or a ULIP, make sure to do your due research and consider your financial needs, the requirements of your dependents, and your family’s future financial goals.
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