Who is an NRI?
An NRI, or a non-resident Indian, is a person who holds an Indian passport but lives outside India for more than 182 days in a financial year. NRIs may have various reasons to live abroad, such as education, employment, business, or family. However, they may still have strong ties to their homeland and wish to secure their future and that of their loved ones in India.
What are the benefits of buying a life insurance policy in India for NRIs?
A life insurance policy is a contract between an insurer and a policyholder, where the insurer promises to pay a sum of money to the beneficiary upon the death of the policyholder or after a certain period of time. A life insurance policy can offer several benefits to NRIs, such as:
– Protection: A life insurance policy can provide financial security to the family of the NRI in case of their untimely demise. It can help them cope with the loss of income, pay off debts, fund children’s education, and maintain their standard of living.
– Savings: A life insurance policy can also serve as a long-term savings instrument that can help the NRI achieve their financial goals, such as buying a house, planning for retirement, or creating a legacy. Some life insurance policies also offer bonuses or dividends that can enhance the returns on investment.
– Taxation: A life insurance policy can also offer tax benefits to the NRI under the Income Tax Act, 1961. The premiums paid for the policy are deductible from the taxable income under Section 80C, subject to certain conditions. The maturity or death benefits received from the policy are also exempt from tax under Section 10(10D), subject to certain conditions.
GST and taxation benefits for NRIs buying life insurance policy in India:
The Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. The GST rates for life insurance policies vary depending on the type of policy and the premium payment mode. For example, term insurance policies have a GST rate of 18%, while endowment policies have a GST rate of 4.5% for the first year and 2.25% for subsequent years.
However, NRIs who buy life insurance policies in India can claim a refund of the GST paid on the premiums under certain circumstances. According to the GST law, an NRI is considered as a non-taxable online recipient who can avail the benefit of zero-rated supply of services. This means that the NRI can either pay no GST on the premiums or claim a refund of the GST paid by filing an online application with the GST portal.
Additionally, NRIs can also enjoy taxation benefits on their life insurance policies under the Double Taxation Avoidance Agreement (DTAA) between India and their country of residence. The DTAA is a treaty that prevents the same income from being taxed twice in both countries. Under the DTAA, NRIs can claim tax relief or credit for the taxes paid in India on their life insurance policies in their country of residence, subject to certain conditions.
Can NRIs purchase a life insurance policy in India?
Yes, NRIs can purchase a life insurance policy in India from any registered insurer, subject to certain rules and regulations. Some of these are:
– The NRI must have a valid Indian passport and proof of residence abroad.
– The NRI must undergo a medical examination either in India or abroad, as per the insurer’s guidelines.
– The NRI must pay the premiums either in Indian rupees or in foreign currency, as per the insurer’s guidelines.
– The NRI must comply with the Foreign Exchange Management Act (FEMA) and other applicable laws while buying and servicing the policy.
What is the term for NRI life insurance?
The term for NRI life insurance is the duration for which the policy is valid and provides coverage to the policyholder. The term can vary depending on the type of policy and the choice of the NRI. For example, term insurance policies offer coverage for a fixed period of time, such as 10 years, 20 years, or up to a certain age. Endowment policies offer coverage for a fixed period of time or until maturity, whichever is earlier. Unit-linked insurance policies (ULIPs) offer coverage for a variable period of time, depending on the performance of the underlying funds.
Are insurance policies issued in foreign currency?
No, insurance policies are not issued in foreign currency in India. They are issued only in Indian rupees and are subject to exchange rate fluctuations. However, some insurers may offer policies that are denominated in foreign currency and provide benefits in foreign currency, subject to certain conditions. These policies are called foreign currency denominated policies or FCNR policies. They are designed to cater to the needs of NRIs who want to protect their assets and liabilities in foreign currency. However, these policies are subject to the approval of the Reserve Bank of India (RBI) and other regulatory authorities.
FlyInsurance 