On 1st February 2020, the honourable Finance & Corporate Affairs Minister of India presented Budget 2020 with a focus on launching key initiatives and programs to propel economic growth. The Budget focused on achieving this growth in several ways, including enhancement of the current infrastructures, promoting entrepreneurship etc. Another key initiative in this direction was the introduction of a new tax regime to boost domestic consumption.
While the new tax structure introduced lower income tax slabs for various income brackets, it also came with various caveats as well as terms and conditions. While individuals can choose between the two, the introduction of two tax structures has definitely caused a stir in the financial community, especially when it comes to tax saving investment instruments. In light of this situation, the real question is, are tax-saver investment plans still beneficial for individuals looking to create wealth while they save on their taxes?
Comparing the two tax regimes
With a focus on boosting consumption, the new tax regime will come into effect from April 1, 2020 and will operate under the new slabs as stated below:
| Income | Income Tax under Existing (Old) Regime | Income Tax Under New Regime |
| Rs 0 to Rs 2.5 lakh | Exempt | Exempt |
| Rs 2.5 lakh to Rs 5 lakh | 5% | 5% |
| Rs 5 lakh to Rs 7.5 lakh | 20% | 10% |
| Rs 7.5 lakh to Rs 10 lakh | 20% | 15% |
| Rs 10 lakh to Rs 12.5 lakh | 30% | 20% |
| Rs 12.5 lakh to Rs 15 lakh | 30% | 25% |
| Above Rs 15 lakh | 30% | 30% |
While the new slabs definitely seem enticing, there is a catch. Individuals will now have the option to choose between the two tax structures; however, under the new regime, individual tax payers will not be able to claim or take advantage of the various income tax exemptions and deductions under Section 80C and 80D of the Income Tax Act, 1961. An immediate investment strategy that comes to mind would be to switch to the new structure and reduce investments in tax-saving instruments.
A hasty decision to switch, however, is not recommended. While the new tax structure is definitely beneficial and puts more liquidity in the tax-payers’ hands, there still are tax-saving investments that have emerged as clear winners post Budget 2020.
In fact, one such instrument that you can take advantage of is the Unit Linked Insurance Plan OR ULIP. Let us understand how.
How are ULIPs favourable
ULIPs have for long been a popular investment option as they offer the dual benefit of wealth creation and life insurance. Under the old tax regime ULIPs can also provide benefits under Section 80C of the Income Tax Act, 1961.
ULIPs can be beneficial to consumers opting in for the new tax structure too. How? i. ULIPs are exempt from Long-Term Capital Gains tax (LTCG) which means that investors still benefit at the time of maturity under the new tax structure ii. ULIPs allow investment in both debt and equity markets, without any tax on switching between funds, allowing investors to focus aggressively on wealth creation; with a dual benefit of a risk / insurance cover.
These factors clearly make ULIPs an ideal investment instrument to fulfil the need of your future financial security.
Take the ULIP of faith – with Finserv MARKETS
For consumers planning to invest in ULIPs, Finserv MARKETS, a techno-analytics driven financial services marketplace is a great choice. Finserv MARKETS’ digital platforms (website and app) offer a 360-degree financial experience along with a portfolio of lending, investment, insurance, and payments products.
Finserv MARKETS offers three types of ULIP plans - Future Gain, Goal Assure and Long Life Goal. All these products are focused on helping customers achieve long-term financial goals with an investment as low as Rs 2,500 per month across any of these plans. They also provide you with an option to choose between three investment strategies for your portfolio; depending on your financial goal - retirement planning, wealth creation or safeguarding one’s children’s future.
ULIPs from Finserv MARKETS also provides investors an option to choose between the funds [Either Equity, Debt, or a hybrid] depending on their risk appetite. Investors can also switch and increase the allocation between Equity and Debt at absolutely no additional charge! In addition, as per Morning Star, ULIPs on Finserv MARKETS enjoy good ratings with approximate returns that are as high as 12-15% over a 5-year investment period. It is important to note that ULIPs come with a 5-year lock-in period, after which investors can withdraw [fully / partially] funds from the plan.
With Finserv MARKETS, the process of buying a ULIP plan is fast, secure and completely hassle-free. The application process involves three simple steps:
1. Select the ULIP plan that you wish to buy i.e. either a Child Plan, Retirement Plan OR an Investment Plan
2. Enter the details such as premium amount, frequency (monthly, quarterly or yearly), age, gender and your contact details
3. Once entered, the platform will generate the most suitable plans that align with your financial goals and objectives
All you have to do then is click the Buy Now option and the platform will guide you through the various steps and document requirements.
Quite evidently, ULIPs are clearly a killer investment instrument post announcement of Budget 2020. While the new tax regime kicks in from April 1, 2020, whether you choose to stick with the old structure OR switch to the new one, ULIPs can definitely help you meet your financial goals and protect yourself and your family at the same time.
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