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ULIPs: Ideal Tax-Saving Investments in Your 30s

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Ideal Tax-Saving Investments in Your 30s
August 03, 2023

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A person starts coming into their own sometime in their 30s. Family responsibilities increase, career goals are set and a regular monthly income becomes a part of your life.

It is also typically the time that tax liabilities increase year on year. Naturally, everyone starts looking for long-term tax-saving investments to help them meet their financial targets.

EEE Tax-Saving Investments in India

The best tax-saving strategies are those that double up as long-term investments. Ideally, pick investments that do not require constant attention. In Indian markets, these come in the form of EEE investments. In such tax-saving investments:

  • The investment amount can be deducted from your taxable income
  • The interest earned or credited to the investor is tax-exempt
  • The proceeds from maturity are also tax-exempt

There are, of course, pros and cons associated with each financial instrument that also doubles up as an EEE investment. Let us understand some of the best tax-free investments for your 30s:

  • National Pension Scheme (NPS) –

    Ideal for retirement investment, the NPS Tier-I account boosts savings with equity allocation and portfolio management based on age. 40% of your savings will be given to you in the form of a pension.

  • Equity-Linked Savings Scheme (ELSS)–

    It is a pure equity-based mutual fund that has a lock-in period of 3 years. It is ideal for aggressive investors.

  • Public Provident Fund (PPF) & Sukanya Samriddhi Yojana (SSY)–

    These funds help you build a retirement corpus through small savings and regular deposits. The SSY scheme is meant as a special investment instrument for daughters. 

  • Unit-Linked Insurance Plans(ULIPs) –

    An investment option that combines market investments with a term life insurance policy.

What Makes ULIPs the Best Tax-Saving Investment?

There is a reason ULIPs are ideal as a tax-saving investment for your 30s. Let us understand what it is that they offer beyond their EEE status:

1. Financial blanket for your loved ones –

In today’s uncertain times, our biggest fear is a sudden demise that could leave our family in financial ruin. ULIPs have an in-built term life insurance policy with the following requirements:

  • The total investment component in various funds must be less than the term insurance cover OR the ULIP must have a goal-protection option enabled.
  • The policyholder can choose the option to terminate the investment in case of their demise and get a one-time payment. Alternatively, the investments can continue until maturity with only the sum assured paid out in the unfortunate event of death.

2. Goal Protection –

At every stage of our lives we have different goals. Sometimes we need to create significant savings for special life events like marriages, college education, etc.

  • For this, all you need to do is choose a ULIP tax-saving investment with a Goal Protection option. In the event of the policy holder’s demise, the insurer will cover all further instalments and the fund continues to grow.
  • Your family will receive the maturity value and your goal will be fulfilled under any circumstances.

3. Investment according to Financial Targets –

ULIPs encourage long-term involvement to maximise savings. A portion of the monthly premium can be placed in a liquid fund and split between equity and debt funds.

  • When your financial responsibilities are lower, you can choose to risk more in the equity market and increase your earnings.
  • When saving for a goal, faced with health expenses, or reaching the end of the policy tenure, you can choose to liquidate your savings or move from a high-exposure equity portfolio to a safer debt one.

4. Portfolio Management –

Above all, the biggest reason ULIPS are the best tax-saving investment for your 30s is their professionally managed portfolio. You can keep track of every happening online and modify your portfolio to suit your financial goals. Here are the automated plans that help you manage your ULIP investment:

  • Auto-Fund Rebalancing – Divide your investments between equity and debt funds to ensure wealth creation. 
  • Systematic Transfer - Buy more when the markets are low and lesser when the markets are high.
  • Return Protector - Collect your gains with a gradual movement from equity to debt, reducing your risk when the markets are unstable. 
  • Safety Switch - Protect gains from market fluctuations through gradual liquidation of your returns.

5. Time-based Bonuses, Lock-In periods and more –

ULIP insurers provide multiple benefits to reward the long-term investor.

  • For those who regularly invest in their ULIPs for more than 5 years, the plan adds bonus units to enhance the value of your portfolio over time.
  • While lock-in periods prevent premature withdrawals for the first 5 years, death benefits are payable at any time.
  • In case of a sudden need for cash, ULIPs allow partial withdrawals after the lock-in period. So, you are never left in a lurch when you need your money the most!

ULIPs are the ideal tax-saving investment for your 30s since they offer high rewards to those invested for a longer time.

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ARN: ED/12/19/17049

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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