Very often I had found investors of middle class Indian society getting confused about the profitability of investment option. Shares or Mutual fund or IPOs - for what should one go to have a safe return? Let me suggest an unique solution for risk free investment option. Unit Linked Insurance Plansor in short the ULIP offers you an important source for a handsome saving on tax and you can also take them as an insurance cover. These plans aim to match the lucrative returns of equity market while offering the risk cover and tax benefit. They offer high returns, risk cover and tax benefit simultaneously. In these plans,the premiums paid by the investor are invested in a mutual fund and the return is offered to the investor. They guarantee sure premiums on the capital invested by reducing the risk associated usually with other forms of equity related investments.

The tenure of these plans is pretty long and is generally up to 15 years . Within this, the risk of market fluctuations is taken care of. The cyclical variations occurring in the money market are addressed because the investment horizon is pretty long. At the time of investment, the premium payments are automatically converted into units at a NAV. The mutual Fund invests in equity and debt instruments. These plans offer both flexibility and liquidity to the investor. The lock-in period of ULIPs is three years and after this period, one can sell the units at any point of time.

The investments under ULIP mutual fund are eligible for tax rebates under Section 80C of the Income Tax Act. The maximum eligible tax deduction amount under Section 80C is Rs. 100,000. As soon as the contribution is made by the investor, the number of units to his credit are increased, and the increase depends on the market price of the units. A small part of the investment is allocated towards the insurance cover. In case of unfortunate demise of the investor, the beneficiaries are paid a lump sum benefit as the insurance cover. If the investor wishes to exit on or before the expiry of the term, the number of units to the credit of the investor is paid off at the prevailing market rate.