Unit Linked Insurance Plan for NRIs

Like Indian residents, NRIs can also invest in India and avail the tax benefits. Considering this, over the years, ULIP investment plans (Unit-Linked Insurance Plans) have become a popular investment option among NRIs. Further, to invest in these plans, NRIs need to follow the stated Foreign Exchange Management Act (FEMA) guidelines. 

ULIP plans serve as an investment tool that helps policyholders reach their long-term financial goals. There are several ULIP plans available for NRIs to participate in the financial market of India. Further, want to know more about the ULIP plans for NRIs? Continue reading the blog and get all the information. 

What Is a ULIP and How Does It Work for NRIs?

ULIP stands for Unit Linked Insurance Plans. As its name suggests, it is a financial product that combines insurance and investment in one plan. Considering this, a section of the premium from the plan is invested in life insurance coverage. Additionally, the remaining amount of the premium is invested in several funds according to the preference of the investors. 

Further, while ensuring the life insurance coverage, the ULIP plans offer market-linked returns to investors. This makes them an excellent choice for NRIs looking for financial protection and wealth creation.

This was all about ULIP investment plans for NRIs and how they work. Moving ahead, let's know the key features of it for NRIs. 

Key Features of ULIP Plans for NRIs

The key features of ULIP plans that it offers to NRIs are as follows:

Investmet Allocation

It is the key feature of ULIP plans for NRIs. In this, considering your risk appetite, you can select the investment plan. Additionally, you can access the benefits of both, i.e., equity and debt funds. Through the investment allocation feature, even after investment towards your selected funds, you are allowed to invest in your future premiums.

Top-Ups

This feature allows you to change your investment from time to time. Considering this, under ULIP plans, you get the feature of paying an additional amount over your current investment plan. Further, choosing this plan allows you during the end of the completion of the plan to fetch a larger amount. 

Fund Switching

If there is market fluctuation or you want to change your investments, under ULIP plans, you can switch between funds. This offers flexibility in your investments. Additionally, it works according to your financial goals and requirements. Apart from this, when the market is slowing down, you can change your investments into debt funds, and when the market gets stable, change them into equities.

Tax Savings

For NRIs, tax savings on ULIPs are a distinguishing feature. Under section 80C of the IT Act 1961, up to INR 1,50,000 per annum premium on ULIP plans is tax-free in India. Apart from this, upon maturity under Section 10 (10D), if you fulfill the conditions stated in Section 10 (10D), the amount gets tax-free. Moreover, death benefits are fully tax-free.

Partial Withdrawal

After the completion of the lock-in period, ULIP investment plans provide the benefits of partial withdrawals. Considering this, without compromising the entirety of the investment, it allows NRIs to use their funds for financial emergencies. Further, the withdrawal amount and the number of times you can withdraw depend on your chosen ULIP plan. 

Premium Payment

In ULIP plans, NRIs have the convenience of paying premiums through several modes, including NRO and NRE accounts. It ensures hassle-free and seamless transactions. For regular payment, NRIs can opt for the single premium payment option. Additionally, can also opt for half-yearly, monthly, or annual payment. This flexibility in payment methods is designed to fulfill the diverse financial needs of NRIs. 

These were the key features of ULIP investment plans available for NRIs. Moving further, let's know the benefits of these plans for NRIs. 

Benefits of Investing in ULIPs for NRIs

Investing in ULIP plans offers NRIs several benefits. It allows NRIs to invest in various market-related securities, such as debts and securities, and get higher returns. Want to know more benefits offered by ULIP plans to NRIs? Read the next section and get your answers.

Market Returns

ULIP plans offer market-linked returns, providing you the ability to invest in debt, equity, and balanced funds. This enables you to get the benefits of the growing economy of India and capitalize on long-term financial growth. It further assists you in improving your investment portfolio. 

Flexibility

ULIP investment plans offer flexible opportunities to investors. It includes:

• You can switch between different funds as per your desires and needs.
• After completion of 5-year tenure periods, you get access to partial withdrawal.
• Adjust premium payments as per your financial goals and investment strategies.

Savings

Certifying financial stability for future requirements like education of the children or retirement, ULIP promotes long-term, disciplined savings. By committing to regular contributions, you can make a financial cushion and, over time, create a substantial corpus. 

Therefore, opt for ULIP investment plans if you are looking for the well-being of your family. This plan also helps you learn a good habit of saving and investing money, along with generating wealth for the long term. 

Now, moving ahead, let's know the eligibility criteria that NRIs need to follow to invest in ULIPs. 

Documents Required by NRIs to Invest in ULIPs

To be eligible to invest in ULIP plans in India, as an NRI, you should comply with the FEMA rules and regulations. Additionally, you also need to submit the mentioned documents to invest in the ULIP plan.

• Application form
• Scanned copy of the passport
• Proof of Indian residence
• Recent passport-size colored photograph
• Proof of overseas residence
• Income proof
• A photocopy of PAN card or Form 60 (those earning income in India)
• OCI or PIO cards as KYC norms
• NRE/ NRO bank account details
• A foreign residency supplementary questionnaire
• Medical examination (if required by the insurance company)

These were the documents that NRIs need to submit while applying for ULIP plans in India. Moving further, let's know the tax benefits that NRIs get from ULIP plans. 

Tax Benefits of ULIP Plans for NRIs

Here is a detailed overview of the tax benefits ULIP Plans offer to NRIs:

Tax Benefits on ULIP Premiums

All Indian citizens and NRIs get tax exemption on the premium paid to ULIP plans. Considering this, under section 80C of the IT Act 1961, on the premium paid up to INR 1,50,000, NRIs are allowed to claim a tax deduction. However, if the premium amount is INR 2,50,000 and equal to or less than 10% of the assured sum. In this scenario, under section 10 (10D) of the IT Act, 1961, NRIs on maturity benefits can claim tax exemption.

Tax Benefits on Death and ULIP Maturity

Applicable under Section 10 (10D), NRIs can claim tax exemption on the sudden death of the policyholder while holding the ULIP investment plan. Further, for maturity, subject to the mentioned provision below, NRIs enjoy several tax benefits:

• For plans issued on or after February 2021: On maturity, when the total premium paid is ≤ INR 2,50,000 in any of the years till the policy ends, only then can NRIs claim tax benefits. 
• For plans purchased before February 2021: If the premium is less than 20% of the assured sum, NRIs can claim tax exemption. 

Further, if the annual policy premium is more than INR 2,50,000, NRIs are liable to pay capital gains tax. It applies to the ULIP plans purchased after February 2021. Apart from this, for any reason, if you make a withdrawal before the completion of the 5-year lock-in period. In this scenario, the withdrawal amount is added to your taxable income and taxes as per your income slab rate. However, if the withdrawal is made after a 5-year lock-in period, no tax is charged. 

Also, if you face double taxation, under the Double Tax Avoidance Agreement (DTAA), you can claim a tax refund or exemption. It helps you avoid paying taxes on the same income twice.

This was all about the tax benefits NRIs received from ULIP investment plans. Moving ahead, let's know how NRIs can invest in these plans. 

How NRIs Can Invest in ULIP Plans in India?

NRIs can invest in ULIP plans in India by choosing the investment that matches their risk appetite and financial goals. Here is how they can do so:

• As mentioned above, choose a plan that matches your financial goals, risk tolerance level, and long-term objectives. So that it can fit into your financial strategy.
• To find the best ULIP plans investment options, compare the different ULIP plans. Evaluating the plans will assist you in identifying the features and benefits that fulfill your needs. Further, it will also help make informed decisions.
• To determine the future benefits and returns of your chosen ULIP plan, take the help of the ULIP calculator. It assists you in getting insights into your selected investment plan. Additionally, through it, you also get an idea of your future returns you will get from this plan.
• Once you have chosen the plan and determined its valuation over the years, complete your KYC norms and submit the required documents. This step certifies your smooth investment process and compliance with the FEMA guidelines.
• Further, using your NRE or NRO account, pay the premium online and begin your ULIP investment that fits your financial goals. 

So, this is how NRIs can invest in ULIP plans in India. Further, investments should be made to adhere to regulations stated by the Reserve Bank of India (RBI) and FEMA. 

Final Thoughts

Lastly, ULIP plans for NRIs are a unique mix of life insurance and investment. It is an attractive option for NRI investors looking for financial security and wealth creation in India. Considering this, with so many options available, when choosing a ULIP investment plan, you should be cautious and opt for the one that provides you with comprehensive insurance and returns.

Further, if you are seeking reliable NRI investment services, connect with Savetaxs. We have a team of financial experts who can assist you in selecting the right investment plan as per your financial goals and risk tolerance. Additionally, they can also help you with tax planning in India.