The trending topic for discussion especially towards end of the financial year is investors looking for investment opportunities and tax saving scheme. This is when ELSS & ULIP schemes step in.  

What are ELSS Funds?

  • ELSS funds (Equity Linked Savings Scheme) are the only type of mutual funds eligible for tax deductions under section 80C of the Income Tax Act, 1961.
  • Investments made in ELSS funds are diversified into various Equity stocks of listed companies based on the investment objective of the investor.
  • The primary objective for investment in ELSS scheme is long term capital appreciation
  • The eligible deduction under 80C is restricted to maximum of 1.5 Lakhs.

What are ULIP Schemes?

  • ULIP stands for Unit Linked Insurance Plan.
  • It is a 2 in 1 scheme which provides both insurance cover along with investment plans.
  • It offers dual benefit of long term capital gains to fulfil your future goals along with financially protecting your family in case of any unfortunate circumstances.
  • Investments made in ULIP schemes diversify the funds into Debt, Equity or both based on risk appetite of the investor.

Investment in ELSS Funds-Points to be taken into consideration.

  • ELSS funds are subject to lock-in period with mandatory period of 3 years.
  • Income earned are taxed as per rules of LTCG.
  • The deduction available under 80C is a cumulative benefit along with various other instruments like PPF, NSC etc.
  • ELSS funds fail to serve maximum benefits if solely approached with tax planning purpose.
  • Proper investment planning will truly magnify the benefits one can derive from ELSS scheme.
  • ELSS schemes do not provide fixed returns and are subject to market fluctuations.
  • It is usually advised to invest in ELSS scheme through SIP as it is dependent on stock prices to get benefit of average out.

Investment in ULIP Scheme-Points to be taken into consideration.

  • Investment in ULIP scheme turn out to be most fruitful in times of volatile market conditions as its insurance aspect acts as a safeguard for the investor.
  • A high risk investor can opt for ULIP schemes in equity funds while a low risk investor should turn towards diversified mutual funds.
  • Premium paid under ULIP schemes are tax deductible under 80C & at the time of maturity the amount is subject to deduction under Section 10.
  • One should have deep understanding of various charges levied on entry and exit from the policy.





1) Lock-In Period

3 years

5 Years

2) Returns

Comparatively higher

Comparatively lower as part of investment covers insurance aspect

3) Taxability

Taxed at 10% on returns above 1 lakh

Taxed at slab rate applicable to investor

4) Charges applicable

Comparatively lower charges.

Comparatively wide variety of higher charges

5) Liquidity

More flexible as it has shorter lock-in period along with option to sell in stock exchange

Less flexible as longer lock-in period and investor has to surrender the policy to withdraw funds.

6) Returns

Returns are dependent on scheme (12%-15%)

Returns can widely vary

If an Investor is aiming to generate high returns with Tax Benefit and low lock in Period, one shall prefer investing in ELSS, however if a person aims at generating decent return with an Insurance Coverage and Tax Benefit, one should prefer investing in ULIP.


Mihir Jain

Associate Consultant |Email: mihir.jain@masd.co.in |LinkedIn Profile

Kalp Lodha

Associate Consultant | Email: kalp.lodha@masd.co.in | LinkedIn Profile

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