Non-Resident Indians, or NRIs, are Indian citizens who have relocated abroad and stayed there temporarily. They are eligible for all the advantages offered to Indian nationals because they are Indian citizens. They also have the right to invest money in India and take advantage of several privileges. An NRI is qualified to take advantage of any tax breaks on investments made in India. Unit Linked Insurance Plans, called ULIPs, have become a well-liked investment choice among NRIs.
Let’s examine the ULIP tax advantages offered to NRIs and how they might benefit them.
ULIP: A trustworthy investing 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. *The insurer provides all savings per the IRDAI-approved insurance plan. Standard T&C applies.
So, an NRI can choose from various financial options in India to increase their savings. In addition to ensuring their financial stability and growth, they can build up a good corpus at home while avoiding paying income tax. 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.
Tax Advantages from ULIP For NRIs
For NRIs, there are two different ULIP tax benefits. As follows:
1. Tax advantages on premium payments
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 paid for their ULIP policy.
This act permits a deduction on premium payments of up to 1.5 lakh rupees. Every sum over this will be taxed. However, as a ULIP policyholder, you should know that these tax advantages only apply for plans issued after 2012 if the premium amount is equal to or lesser than 20% of the total guaranteed. The estimated value of your ULIP investment can be calculated using a ULIP calculator based on the premiums, tenures, and other information you enter.
* There are two tax regimes in India – new and old. Choose the correct one after consulting an expert to get the desired tax benefit. You can opt for a regime change during the next financial year.
2. Tax benefits maturity and death claim
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 case 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 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 lesser than or equal to 2.5 Lakhs for the ULIP plans issued after February 2021.
How do you invest in India to avail of ULIP tax benefits for NRIs?
The Foreign Exchange Management Act (FEMA) allows NRIs to invest in India. Yet, 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.
So, if an NRI wishes to gain from the tax advantages of ULIP insurance, they must find the ULIP policy that best suits their financial needs. NRIs will be needed to complete the policy application form and submit the following papers once the ULIP policy is finalized:
- A copy of their passport (Scanned)
- Passport-sized photograph (recent)
- Proof of income (valid source of income)
- Proof of residence (Indian)
- Proof of residence (overseas)
- Medical examination (If required by the company)
- A copy of PAN card Form 60 (For the NRIs earning in India)
- Foreign Residency Supplementary questionnaire
- A copy of the Overseas Citizenship of India (OCI) card, etc.
- A copy of the Person of Indian Origin (PIO) card
In general, NRIs can save money on taxes in India thanks to ULIP tax incentives. Also, NRIs benefit from life insurance with ULIPs and market-linked investment possibilities. This enables ULIP tax benefits for NRIs on your hard-earned money, making ULIP a fantastic option for investment in India.