ULIPs vs NPS – Which is a better investment option?

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ULIP stands for Unit Linked Insurance Plans, and NPS stands for National Pension Scheme. NPS and ULIP are two famous tax-saving options under Section 80C of the Income Tax Act.

Indian taxpayers who choose to invest in these schemes can save up to ₹ 46,800 annually in taxes. While ULIP and NPS are tax-saving options, people find it difficult to choose the best among them. Let’s understand what ULIP and NPS are and which is a better option.

Understanding NPS in detail.

The National Pension Scheme (NPS) is a pension scheme introduced by the government of India. People working in government, private, public, and unorganised sectors can invest in this scheme.

You must note that the armed forces can’t participate in this plan. You can choose to invest funds you can afford at regular intervals while you are employed. If you subscribe to this plan, then you can withdraw a certain percentage of your corpus upon retiring. You will get the pending amount as your monthly pension.

Understanding ULIPs in detail.

Unit Linked Insurance Plans (ULIPs) are a mix of insurance plans and investments. The primary purpose of a Unit Linked Insurance Plan is to give you a chance to secure your financial future while commencing your investment journey.

The premium you pay towards a ULIP plan is split into two portions. One portion goes towards the insurance coverage, while the second portion goes towards investments.

You get to decide which type of funds you want to invest in. You can invest in debt funds, equity funds, or a combination of both. This depends on your risk appetite.

Equity funds are highly volatile but can give better returns than debt funds, whereas debt funds provide safety but lesser returns on investments. So, choose carefully as per your risk appetite so you can gain maximum returns to achieve your financial goals in the future safely. You can also switch between funds as per market fluctuations.

Who should invest in NPS?

NPS or National Pension Scheme is appropriate for those who want a monthly pension post-retirement. If you are one of the lots who want to retire early and have a low-risk appetite, then you can invest in NPS without thinking twice.

You can also consider investing in NPS if you are a salaried employee who doesn’t have enough Section 80C investments. NPS can help save taxes and give a regular monthly pension once you retire.

Who should invest in ULIPs?

If you are someone who wants both life insurance and investments, then you can go for ULIP plans. With ULIPs, you receive the best of both worlds as you get a life insurance cover as well as an opportunity to invest in money markets and achieve your financial goals in the long term. ULIPs are recommended for all as they come with a lot of perks and are popular among all investors.

NPS and ULIPs are tax-saving prospects that fall under Section 80C of the Income Tax Act. Now that you know both plans in detail, you can make a wise decision soon.

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