1) We all want to ensure that we can save as much tax as possible. For this, we invest in various products to take benefit of deductions, specifically u/s 80C.
2) Where we get stuck is which product to invest in. It's easy to choose between different categories but the most difficult choice is between ULIPs and ELSS.
3) ELSS has the minimum lock-in period ( 3 years) among tax-saving investments. But for each ELSS we do, the lock-in is 3 years from the date of investment.
4) ULIPs come with a minimum lock-in of 5 years. But this lock-in is from the date of the first installment only ie for investments done in 4th year, lock-in is only 1 year.
5) ULIPs have a higher expense ratio but provide life cover to investors, which ELSS does not.
6) ELSS redemption has a tax rate of 10% but ULIPs are tax-free (if the investment is up to 2.5 lakhs per annum).
7) ULIPs offer tax-free switches from one category of funds to another but ELSS does not offer any such benefits.
8) As far as the rate of return is concerned, both are market dependent and may not vary much over a 5-year period.
