Buy a Life Insurance Plan in a few clicks
A plan that offer guaranteed returns and financial protection for your family.
Kotak Guaranteed Fortune Builder
A plan that offers guaranteed income for your future goals.
Thank you
Our representative will get in touch with you at the earliest.
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
ULIPs are multidimensional financial instruments with tax advantages. They provide NRIs with insurance coverage and investment opportunities for fund accumulation and security.
Unit-Linked Insurance Plans (ULIPs) are dual-purpose plans that are advantageous for Non-Resident Indians (NRIs) as they provide insurance coverage along with some investment options. By understanding the ULIP taxation for NRIs, NRIs aim to give more opportunities for long-term financial planning and secure their potential future.
This guide explores how ULIPs offer tax advantages for NRIs, aiding them in understanding tax complexities and making wise investment choices to meet their financial objectives. These plans provide potential for wealth growth and significant tax advantages under Indian tax laws.
A ULIP, or Unit Linked Insurance Plan, is a type of insurance product that combines insurance coverage with investment opportunities. Your premium is split: part of it goes towards insurance, while the rest is invested in funds like stocks or bonds tailored to your risk preference and financial objectives. The performance of the investments directly impacts the returns you receive on your policy. ULIPs offer flexibility regarding investment choices and the ability to switch between funds, but they also come with charges and fees that may affect your overall returns.
There are two types of ULIP taxation for NRI. They are:
Here are the details of the benefits that fall into these two categories:
One of the primary tax benefits of ULIP for NRIs is the tax exemption on the maturity amount. According to Section 10(10D) of the Income Tax Act, any sum received by the policyholder upon maturity of the ULIP is entirely tax-free. This means that NRIs can enjoy the entire maturity amount without tax deductions, making ULIPs an attractive long-term investment option.
NRIs can also benefit from tax deductions on their taxable income by investing in ULIPs under Section 80C of the Income Tax Act. Currently, NRIs can claim a deduction of up to ₹1.5 lakhs on the premium paid for ULIPs in a financial year. This deduction applies to the total premium paid for all life insurance policies, including ULIPs, provided it does not exceed the prescribed limit.
ULIPs offer the flexibility of partial withdrawal after the lock-in period, which is usually five years. The amount withdrawn is tax-free, making it a useful feature for NRIs who may require funds for emergencies or other financial needs. This tax benefit can help NRIs effectively manage their finances and fulfill unexpected expenses without tax implications.
ULIPs allow investors to switch between different investment funds based on their risk appetite and market conditions. NRIs can avail of this feature without tax liability on the gains made during the switching process. This tax-free fund switching allows NRIs to maximize their returns and optimize their investment portfolio.
The nominee receives the death benefit in the unfortunate event of the policyholder’s demise during the policy term. The death benefit received by the nominee is exempt from income tax under Section 10(10D). This ensures that the sum assured, along with any bonuses or investment gains, is entirely tax-free for the nominee, providing financial security to the family of the deceased NRI policyholder.
NRIs investing in ULIPs can claim tax benefits under Section 80C of the Income Tax Act, 1961. They can deduct up to ₹1.5 lakh annually for premiums paid towards ULIPs. However, for policies issued after February 1, 2021, if the aggregate premium exceeds ₹2.5 lakhs, maturity proceeds may be taxed as capital gains, while exemptions under Section 10(10D) continue for policies with annual premiums below ₹2.5 lakhs.
Maturity and death benefits received from ULIPs are subject to tax regulations in India. As of the current guidelines:
Note: Tax exemptions are subject to the provisions of the Income Tax Act and may vary based on individual circumstances.
Like resident policyholders, NRIs can enjoy an exemption from Long-Term Capital Gains (LTCG) tax on gains from ULIPs, provided the annual premium remains below ₹2.5 lakh.
As a ULIP policyholder, an NRI can avail of tax exemption on their plan under the guidelines of the Income Tax Act 1961. This allows them to save more money because investing in ULIPs gives them the option to save more tax.
So, an NRI can opt for different financial avenues in India to build more on their savings. This allows them to be assured of their financial growth and stability and build up a decent corpus back at their home while saving income tax.
Unit-Linked Insurance Plans (ULIPs) hold significant importance for NRIs due to their multifaceted benefits:
ULIPs offer life insurance coverage and investment opportunities, providing NRIs with financial security for themselves and their families.
NRIs can use ULIPs as a tool for retirement planning. They can build a corpus over time through systematic investments while ensuring life cover.
ULIPs offer tax benefits under Section 80C for premium payments and tax-free returns on maturity and death benefits under Section 10(10D), helping NRIs optimize their tax liabilities.
ULIPs facilitate estate planning for NRIs by providing a structured way to pass on wealth to their beneficiaries, ensuring a smooth transfer of assets in the event of their demise.
For NRIs with investments spread across multiple currencies, ULIPs denominated in Indian rupees offer a way to diversify currency exposure and potentially mitigate currency risk.
NRIs interested in purchasing ULIPs in India can do so by following a straightforward procedure:
Submit the required documents along with the application form to the insurer. This typically includes a scanned copy of the passport, proof of residence in India and overseas, proof of income, OCI/PIO card (if applicable), PAN card, and other documents for KYC compliance.
The insurer evaluates the application and issues the policy upon approval.
NRIs can pay premiums through Indian bank accounts or other approved channels. Payment options include domestic/international credit cards, internet banking, debit cards, online wallets, CCSI, NACH, etc.
NRIs interested in securing their financial future through ULIPs can conveniently pay their premiums using multiple modes that cater to their specific needs and locations. We will now explore the various modes through which NRIs can pay their ULIP premiums.
In the digital age, online payment has become the most accessible and widely used mode of paying ULIP premiums for NRIs. They can easily access their insurance provider’s website or mobile app and make premium payments using their international debit or credit cards. Additionally, they may be able to transfer funds from their NRE (Non-Resident External) or NRO (Non-Resident Ordinary) bank accounts directly to the insurer’s account.
For NRIs who prefer a hassle-free payment process, the Electronic Clearing Service (ECS) is a convenient option. Linking their NRE/NRO bank account to the ULIP policy will automatically deduct the premium amount from their account on the due date. This ensures timely payments without the need for manual intervention.
For NRIs who prefer to make bulk payments or have significant funds in their foreign accounts, SWIFT (Society for Worldwide Interbank Financial Telecommunication) transfer is a viable option. Through this mode, they can transfer funds directly from their foreign bank account to the insurance company’s account. Providing the correct policy details and SWIFT code is essential to ensure smooth and accurate transactions.
Many insurance providers have dedicated NRI service centers to cater specifically to the needs of non-resident customers. NRIs can visit these centers or contact them via phone or email to get assistance with their premium payments. These service centers can guide NRIs through payment, address their queries, and offer personalized solutions.
In certain cases, NRIs might prefer to seek assistance from authorized agents or insurance company representatives. These agents can help NRIs understand the payment options, complete the necessary paperwork, and ensure their premium payments are processed smoothly.
NRIs benefit from investing in ULIPs in India through favorable ULIP taxation for NRI policies:
NRIs can claim deductions of up to ₹1.5 lakh annually under Section 80C of the Income Tax Act for ULIP premiums paid, reducing their taxable income.
Maturity benefits and death benefits received from ULIPs are typically tax-free under Section 10(10D) of the Income Tax Act, providing tax-free returns on investment.
NRIs enjoy exemption from Long Term Capital Gains (LTCG) tax on ULIP gains, provided certain conditions are met, offering additional tax advantages.
Overall, ULIP taxation for NRI is a great way to save taxes in India. Also, along with market-linked investment options, NRIs get the added benefit of life insurance with ULIP. This makes ULIP an excellent choice for investment in India while allowing tax benefits on your hard-earned money.
1
NRIs can purchase ULIP policies in India and avail of the associated benefits.
2
The TDS rate for ULIP proceeds for NRIs is typically set under Section 195 of the Income Tax Act. A lower rate may apply if a Double Taxation Avoidance Agreement (DTAA) is in place.
3
NRIs can claim tax deductions on premiums under Section 80C. Maturity proceeds and death benefits are tax-free under Section 10(10D), subject to certain conditions. Long-term capital gains on ULIPs are exempt if annual premiums are within specified limits.
4
NRIs are eligible for the basic exemption limit on their income, similar to resident Indians. When it comes to NRI ULIP taxation, it is essential for NRIs to understand the implications and regulations surrounding their investments.
5
A Tax Residency Certificate (TRC) certifies the taxpayer’s country of residence and is required to avail benefits under DTAA.
6
Yes, NRIs are taxable on income earned from investments in India but can avail benefits and exemptions under various sections of the Income Tax Act and DTAA provisions.
7
NRIs are subject to the same tax rates and slabs as resident Indians.
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
