Guidelines

Are mutual funds better than ULIPs?

Are mutual funds better than ULIPs?

Mutual funds offer the benefit of low costs and professional management. SEBI has capped the expense ratio on mutual funds to 1.05% while there is no such limit for ULIPs. The charges for ULIP schemes can go much higher than mutual funds.

Why you should not invest in ULIP?

To beat the post-tax net return from a ULIP, an equity MF would have to give a much higher net return as an equity MF investor will have to pay a 10% LTCG tax on LTCG of above Rs 1 lakh. ULIPs are not meant to give you adequate insurance cover which should ideally be taken through a good term plan.

Is it good time to invest in ULIPs?

Industry experts say, with multiple charges being extremely low now—ULIPs have become one of the best bets for long-term wealth creation. Goyal says, “This is the time to go and invest in ULIPs.

Is mutual fund tax free?

Long term capital gains upto Rs 1 Lakh is totally tax free. Mutual fund tax benefits under Section 80C – Investments in Equity Linked Savings Schemes or ELSS mutual funds qualify for deduction from your taxable income under Section 80C of the Income Tax Act 1961.

What’s the difference between mutual funds and ULIPs?

To compare these charges with ULIPs, the direct plans of most equity Mutual Fund schemes are generally lower than the 1.35% mark while the regular plans are higher than 1.35%. Apart from the expense ratio, Mutual Funds have one additional charge called the exit load.

Are there any tax benefits for investment in ULIPs?

ULIP s are known for the tax benefits that they offer. You can claim a deduction of up to 1.5 lakhs on your investment in ULIPs under section 80C of the Indian Income tax Act. Where Mutual funds are concerned, you can avail deductions only for Equity Linked Savings Scheme (ELSS).

Is there a mortality charge on an ULIP?

This is often called a mortality charge. The Fund Management Charges for the ULIPs, however, are lower than Mutual Funds, being 1.35% and 2.5% respectively. Moreover, the insurance regulator IRDAI mandates that the total effective charges on ULIPs should not exceed 2.25%.