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  • UTI-ULIP provides good tax-saving investment option for salaried individuals

    Published on February 10, 2011

    Mumbai: Tax planning is an important aspect of financial planning. For many tax paying individuals, avoiding or at least lowering the tax outflow is the major objective of managing one’s finances and investing in tax-saving financial instruments. That’s the reason why tax savings schemes get priority over other forms of savings instruments in an individual’s portfolio. While saving taxes may be the primary objective, it is prudent for individual investors to take a holistic view and consider the two important issues of asset allocation and life insurance needs.

    For salaried individuals contributing 10-12% towards provident fund, it would be wise to choose a tax savings instrument which has at least some exposure to equity for long term growth. It has been noticed that tax benefits do, to some extent, reduce the aversion and bias against investing in equity.

    UTI Unit Linked Insurance Plan (UTI-ULIP) offers an excellent tax-saving option for salaried individuals. These mutual fund schemes not only offer a tax savings option – with a tax rebate under Sec 80C of the Income-Tax Act – but also bundle life insurance cover, accident insurance cover, and investment in a balanced portfolio of debt and equity.

    An investor can, of course, invest in such products separately. But UTI ULIP offers convenience – combining tax-saving, superior asset allocation and insurance cover – in a single package.

    UTI Mutual Fund is a pioneer in this type of scheme, having launched its ULIP way back in 1971. UTI ULIP is a unique product, which provides multiple benefits viz. low cost life insurance cover without any medical examination (life cover up to Rs 15 lakh), accident cover up to Rs.50,000, and tax benefits under Sec 80C of Income Tax Act, 1961. Compared to other tax-savings instruments such as bonds, UTI-ULIP provides Easy Liquidity and Ability to time investments for payment of renewal contribution.

    The Rs 2,997 crore UTI-ULIP has a sizeable investment (38%) in equities, while the balance is in debt instruments, including long-term debt, corporate paper and government securities. UTI-ULIP has outperformed its benchmark Crisil debt-hybrid index consistently over the years. UTI ULIP has generated a return of 34.65% as compared benchmark return of 29.70% over a period of one year ( as on 31.12.10), 11.90% as compared to benchmark return of 8.87% over a period of 3 years and 13.79% over a period of 5 years.

    UTI-ULIP offers two options: Investors can either decide for a 10-year plan or a 15-year plan, while the target amount can vary between Rs 15,000 to Rs 15 lakh.


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