ULIPs Vs ELSS: Which is Better Investment?

ULIPs Vs ELSS: Which is Better Investment?

ULIPs Vs ELSS: Which is Better Investment?

Feb 27, 2019 CFO Services by milind

“Life is a matter of choices”, says John Maxwell. The choices we make affect every aspects of our life. A major choice or decision we need to make as adults is to invest wisely. A secure future is the key to a happy present. Unless we plan a little in advance, we cannot enjoy the perks of life in our present.

However, with so many companies, plans and conditions, the process of making the right choice could seem to be a bit arduous. A good way to make this easy and smooth is to consult a financial advisor or do your own thorough research.

To help you get started, let’s discuss about two of the most popular plans available in the market. Equity Linked Savings Schemes (ELSSs) is an equity fund that is purely a mutual fund investment scheme. Unit Linked Insurance Plans (ULIPs) on the other hand, provide the perfect balance of an insurance policy and market investment. Although both are tax saving schemes, there isn’t anything common between them. Here is a breakdown of the difference you will notice:


Insurance v/s Investment:

ELSS is a tax saving mutual fund that has fixed charges and you have no control over where your money will get invested. There is no insurance provided with ELSS. On the other hand, ULIPs are a market-linked product that offer the dual benefits of an insurance as well as an investment. You have the freedom to choose between investment avenues and can easily switch between those depending on life stage goals / market movements.

Returns and Benefits:

ELSS and ULIPs offer substantial returns as well as tax savings under Section 80C of the Income Tax Act, 1961.  However, with ULIPs, your returns on investment after maturity (5-year lock-in) are exempt from tax under Section 24 (b) whereas ELSS returns are taxable under LTCG or Long-Term Capital Tax gains.

Also Read: All You Need to Know about New Generation ULIP

Lock-in Period:

ULIPs show returns only when invested for a longer time frame. This means your money isn’t liquid for the lock in-period of five years, as opposed to an ELSS which has a three-year lock-in period.


In ELSS, there is a single charge applicable to the investment whereas in ULIPs, there are various charges applied to your premium before investing the same into different avenues. These charges include: fund management charge, fund switching charge, fund administration charge etc.


ULIPs give investors the option to switch and invest between hybrid, debt and equity funds. Investors can choose to divert funds as per their convenience. ELSS on the other hand is pretty rigid and does not allow this flexibility to investors.

That’s our analysis of ELSS and ULIPs. Which team are you on? Be sure to check with a trusted advisor or do a comparative study by checking online for ULIPs and ELSS plans before you make your decision.

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