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In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/492
As per the Foreign Exchange Management Act (FEMA), NRIs can invest in India, including ULIP plans. Read this blog further to learn more about this.
Among all the investment options in India, Unit Linked Insurance Plan (ULIP) is currently one of the most popular options, and many people are investing in it. However, what if an NRI wants to invest in ULIP in India? NRIs can invest in ULIP schemes to benefit the security of insurance and returns on investment.
Investment is one of the main sources of wealth generation. It helps you earn money and assets with the help of the right schemes. However, Investing can be a little tricky if you are residing in a foreign land. Many people have questions about whether non-residents can invest in India. When it comes to India, NRI investors are welcome to invest in various domestic schemes. ULIPs are one of the most popular plans for investment.
ULIP plans stands for Unit Linked Insurance Plan. It is a financial product that combines life insurance coverage with investment opportunities. A portion of the premium you pay when you invest in a ULIP is used to provide life insurance coverage. In contrast, the remaining portion is invested in a variety of funds, such as equity, debt, or a mix of both, based on your risk appetite. ULIPs offer a dual benefit of life coverage and potential wealth creation through investment returns.
Also Read: What is ULIP?
As per Section 2(30) of the Income Tax Act, 1961, “non-resident as a person who is not a resident”. A Non-Resident Indian (NRI) is an Indian citizen who is residing outside India for 182 or more days in a financial year. Income Tax Act 1961 and Foreign Exchange Management Act govern and prescribes the taxation rules for NRIs in India.
According to the FEMA, a NRI is a person who has left India or remains outside of it for the purpose of business, employment, vocation, or any other circumstances indicating his or her intention to remain outside India for an unsure amount of time.
As per the Government of India and the regulations of FEMA (Foreign Exchange Management Act), NRIs are allowed to invest in India. ULIPs (Unit Linked Insurance Plans) have gained popularity as a hybrid financial instrument combining insurance and investment benefits. NRIs can invest in ULIPs, subject to certain regulations and procedures set by the Insurance Regulatory and Development Authority of India (IRDAI).
It is suggested that as an NRI, you should look through all the ULIP investment options available in India and select the best ULIP policy in India that fits your investment goals
There are many reasons why an NRI should invest in India. Here are a few important points to note:
If you are an NRI, all you need is to have the required documentation and a mode of payment through an Indian bank to invest in India. There may be other minor requirements, but in general, you only need to fulfil the documentation part and have an Indian source of payment for investing in the country. You will be asked for an NRE/NRO bank account in an Indian bank as well.
NRIs can make premium payments using various modes, such as:
In order to be eligible to invest in India as an NRI, you must comply with the rules and regulations. Here is a general list of documents required to be submitted by NRIs to invest in India:
Furthermore, there are some basic documents that are required to comply with the KYC and anti-money laundering norms. The insurer might ask for other documentation that must be cleared while selecting a ULIP Policy.
Note: The actual list of documents might vary depending on the insurer and their policy.
There are numerous advantages of ULIPs beyond providing returns and insurance to the policyholders. Take a look at some of the benefits of ULIPs that can be useful for NRIs:
ULIPs offer insurance coverage, providing financial security for the policyholder’s family in case of unfortunate events.
NRIs can benefit from exposure to Indian equity and debt markets through ULIP investments.
ULIPs allow switching between investment funds based on market conditions and risk appetite.
ULIPs have the potential to generate wealth over the long term, helping NRIs achieve their financial goals.
Tax benefits on premiums and tax-free maturity benefits enhance the overall returns from ULIP investments.
Not only is a ULIP for NRI a good retirement plan, but it also helps reduce the tax burden. The following is a list of ULIP tax benefits for NRI investors.
NRIs are entitled to the same tax benefits under Section 80C as Indian residents. A tax deduction of upto ₹1,50,000 can be availed of by NRIs as per the list of investments provided in Section 80C. These deductions are subject to the following conditions:
In accordance with Section 10(10D) of the Income Tax Act (ITA), the death benefit received by the nominee in the event that the policyholder passes away while the ULIP policy is in effect, is tax-exempt.
Also Read: What is Section 10D of the Income Tax Act?
NRIs may be subject to taxation in both their home country and India. Their income could be significantly reduced by paying two times as much in taxes. A DTAA (Double Tax Avoidance Agreement) can help to avoid this. Due to India’s DTAA agreements with 80 nations, an NRI can be eligible for tax exemption from one of the two nations or a tax credit for one of the two.
Investing in ULIPs is a smart decision for anyone. It can help you accumulate wealth and secure your future with the insurance feature. While investing in ULIPs, take the following factors into consideration:
NRIs can invest in ULIPs using foreign currency held in their NRE (Non-Residential External) or FCNR (Foreign Currency Non-Residential) accounts.
Investment returns and maturity proceeds can generally be repatriated outside India after necessary taxes are paid.
NRIs need to follow the regulations set by the Reserve Bank of India (RBI) and IRDAI for investing in ULIPs.
Tax implications vary based on factors like investment duration and residency status. NRIs should consult with tax experts to understand their tax liabilities.
NRIs can own ULIP policies in their own name and nominate residents or NRIs as beneficiaries.
NRIs can pay premiums using funds from their NRE/NRO (Non-Residential Ordinary) accounts or through inward remittances from abroad.
NRIs can invest in ULIPs in India. ULIPs offer both insurance and investment benefits. But before investing, they should understand the rules, taxes, and documents needed. Consulting with financial consultants and tax professionals can help make informed choices of investment for NRIs that align with their financial goals and circumstances.
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
In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/521
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.
