ULIPS and Section 80C

One of Investments which are eligible under Section 80C deduction is investment in ULIPS.
What is a ULIP? ULIP or Unit Linked Insurance Plan has a mix of insurance along with investment. From a ULIP the goal is to provide wealth creation along with life cover.  The seller of a ULIP puts a portion of your investment towards life insurance and rest into a fund that is based on equity or debt or both and matches with your long term goal. These goals could be retirement planning, children’s education or another important event you may wish to save for.
Tax Deduction under Section 80C? Deduction is available on ULIPS under Section 80C, provided the sum assured is at least 10 times the annual premium. This is within the overall limit of Rs 1,50,000 of Section 80C. Of course you can invest a higher amount, but the deduction will be limited to Rs 1,50,000.
How do ULIPS work? ULIPS are usually designed in a way that they allow you to switch your portfolio between debt and equity based on your risk appetite as well as your knowledge of how the market is performing. It has been noticed that many of the ULIP buyers do not have the time or adequate knowledge to understand the mix they must keep between debt and equity and also when to make the right switch. Therefore, if you are someone who has deep knowledge of how the fluctuation of interest rates and equity returns work – this may be the product for you. Also, it is wiser to invest in a ULIP with a long term horizon, of at least 10 years.
Can ULIP be bought for others? An individual may purchase a ULIP in his own name, or for spouse or any child. Child may be married or unmarried, dependent or independent, minor or major – all these investments shall qualify for deduction under Section 80C.
Tax benefit on maturity? You are allowed to make partial withdrawals after 5 years. There is no tax on the withdrawals & maturity for ULIPS provided the sum assured is at least 10 times the annual premium.