As the year nears a close, it is once again time to examine and get an early head-start to your financial planning. Traditionally, to achieve this, people mostly deposited their funds in banks or invested in fixed deposits. However, as their lifestyle change and their financial needs grow, they now look at expanding their options. This means not only saving but also reaping returns from their funds.

Hence, the focus has shifted to insurance-cum-investment products that would serve as capital formation tools to fulfil goals, provide security during unforeseen circumstances, and, most commonly, provide tax-saving benefits.

So, here is a guide to tax savings with insurance-cum-investment products to reap higher returns.ITR filing is mandatory in 10 situations – Check if you fall in any of them

Unit Linked Investment Plans (ULIPs)

Unit Linked Investment Plans, also known as ULIPs, are a promising option for individuals with high risk appetite looking for an ideal blend of life insurance coverage and substantial capital appreciation through investment. The premiums are invested into various funds available across equity and debt instruments. A part of premium additionally goes into providing life cover to the policyholder. The investor enjoys the flexibility to switch between funds here and invest as per their risk appetite.

Though ULIPs carry a risk element, if invested corresponding to market scenarios, one can earn up to 12-15% returns on their investment. The other advantages that make ULIPs an attractive investment option are that they provide tax savings under section 80C and 10 (10D) of the Income Tax Act. The policyholder can also benefit from the fact that ULIP offers tax-free investment up to Rs 2.5 lakh annual premium. This is a wiser investment avenue as compared to options like mutual funds where this benefit is unavailable.

The Guaranteed Return Plans come with the benefit of investment cum savings that promise assured returns after a defined period. Regarded as a good alternative to traditional plans such as FD, NSCs and PPF, the new-age guaranteed return plans offer returns as high as 7.2 %. Suitable for investors with a low-risk appetite who want to secure their money from volatile markets and financial conditions like an economic slowdown, the guaranteed return plan is ideal when investing for specific life goals. This is because it allows them to predict the exact amount of money they will receive upon maturity.

Such plans also offer the flexibility of opting for lump sum amount at maturity or regular stream of income which can be taken on monthly, and yearly basis, decided at the time of purchase of the policy. Guaranteed Return Plans offer life cover benefit equivalent to 10 times of the annual premium paid. These plans are a good tax saving instruments as they offer tax benefits under Sections 80C for the invested amount and under Section 10 (10D) of the Income Tax Act, 1961 on the maturity amount .

Capital guarantee plans

If you are looking to invest your funds while keeping the principal amount safe and also reaping returns on investment, then a capital guarantee plan is the investment for you. This plan segregates the investment into two portions: a Unit Linked Insurance Plan (ULIP) and a guaranteed return plan. This ensures that the insured receives 100% capital protection while also gaining from market-linked investments that may arise during the policy period. It also provides tax benefits under Section 80C for the premiums paid for up to Rs 1.5 lakh in a financial year and under section 10 (10D) on maturity amount.

Child plans

Planning for your family’s future ranks at the top of one’s financial objectives. It’s important to understand the benefit of investing early. Do you know you can start investing for your child as early as 90 days from his or her birth? Once you go in for long-term, you’ll reap higher returns too. Also, the waiver of premium feature in these plans is a key attractive feature in these plans, in the event of policyholder’s death as the policy continues and the child receives maturity amount to fulfil his goal even in the absence of policyholder. Now, coming to tax benefits, the investor can avail of tax benefits under section 80C, owing to the life insurance component. The Income Tax Act allows a maximum exemption in tax of up to Rs 1.5 lakh per year under various such child plans.

To recap, early investment in these insurance-cum-investment products is recommended for making the most of your returns and gaining additionally by saving tax. However, before making a final decision, check the various options online and compare the features to your long-term goals.