Non-Resident Indians, or NRIs, are Indian citizens who have relocated abroad and are staying there temporarily. They are eligible for all the advantages offered to Indian nationals because they are Indian citizens. They also have the complete right to invest money in India and take advantage of a number of privileges. An NRI is qualified to take advantage of any ULIP tax benefits for NRIs on investments made in India.
Unit Linked Insurance Plans, also referred to as ULIPs or simply as ULIPs, have grown to be a well-liked investment choice among NRIs. The estimated value of your ULIP investment can be calculated using a ULIP calculator based on the premiums, tenures, and other information you enter.
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ULIP: A Trustworthy Investment Choice
As a holder of a ULIP policy, an NRI may benefit from tax exemption under the provisions of the Income Tax Act of 1961. They can save more money because they have the choice to save more tax by investing in ULIPs.
Therefore, an NRI can choose from a variety of financial options in India to increase their savings. In addition to ensuring their financial stability and growth, they can build up a respectable corpus at home while avoiding paying income tax.
Tax benefits from ULIP for NRIs:
For NRIs there are two different ULIP tax benefits. As follows:
- Tax advantages on premium payments
- Tax advantages for the maturity and claims made after the policyholder’s passing away
Let’s examine the ULIP tax benefits for NRIs in more detail:
1. Tax advantages on paid premiums
According to the rules of Section 80C of the Income Tax Act, all ULIP policyholders, whether Indian or NRI, are qualified to receive tax treatment on the premiums they pay for their ULIP policy. This act permits a deduction on premium payments of up to 1.5 lakh rupees. Any sum in excess of this will be taxed. However, as a ULIP policyholder, you should be aware that for plans issued after 2012, these tax advantages are only applicable if the premium amount is equal to or less than 20% of the total guaranteed.
2. Maturity and death claims for tax benefits
According to Section 10 (10D) of the Income Tax Act, a policyholder or the nominee is qualified for tax benefits on the maturity amount or the death benefits. A policyholder will not owe income tax on the maturity amount under the terms of this statute. Otherwise, the nominee will not be required to pay income tax on the amount received as the death benefit in the event that the policyholder passes away.
However, some restrictions of Section 10 (10D) of the Income Tax Act apply to the maturity advantages.
- The maturity tax benefit is only available for ULIP plans that were issued before February 2021, where the ULIP premium amount is less than or equal to 20% of the total ULIP sum insured.
- However, the possibilities alter to the ULIP premium amount being less than or equal to 2.5 Lakhs for the ULIP plans that have been issued after February 2021.
The tax benefits mentioned in the article may not apply if you opt for the new tax regime since many tax exemptions and deductions have been scrapped within the new regime. They are also subject to any changes in the law.
How may foreign investors invest in India to benefit from the ULIP tax benefits?
NRIs are able to invest in India because of the Foreign Exchange Management Act (FEMA). However, there is a complex documentation process that one must be aware of before making investments in India as an NRI. FEMA opens the door to ULIP tax benefits for NRIs by permitting investment in ULIP plans.
Therefore, if an NRI wishes to gain from the tax advantages of ULIP insurance, they must find the ULIP policy that suits their financial needs. NRIs will be needed to complete the policy application form and submit the following papers once the ULIP policy is finalised:
– A copy of their passport (Scanned)
– Passport-sized photograph (recent)
– Proof of residence (Indian)
– Proof of residence (overseas)
– Proof of income (valid source of income)
– Copy of PAN card Form 60 (For the NRIs earning in India)
– Foreign Residency Supplementary questionnaire
– Medical examination (If required by the company)
– Copy of Person of Indian Origin (PIO) card
– Copy of Overseas Citizenship of India (OCI) card, etc.
In general, NRIs can save a lot of money on taxes in India thanks to ULIP tax incentives. Also, NRIs receive the additional benefit of life insurance with ULIPs in addition to market-linked investment possibilities. The ULIP calculator is a simple tool that you can use to predict the return you might get at maturity by entering a few details. This enables tax advantages on your hard-earned money, making ULIP a fantastic option for investment in India.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.
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