Indian citizens who have relocated abroad and temporarily resided there are known as NRIs, or Non-Resident Indians. Due to their citizenship, they are qualified for all benefits provided to Indian citizens. All tax benefits offered on investments made in India are available to NRIs. Unit Linked Insurance Plans, referred to as ULIPs or simply as ULIPs, have become a well-liked investment choice among NRIs.
The ULIP calculator is a hassle free and simple tool that you can use to predict the return you might get at maturity by entering a few details.
Let’s take a look at the ULIP tax advantages offered to NRIs and how they might benefit them.
ULIP: A Trustworthy Investing Choice
An NRI may be eligible for tax exemption as a holder of a ULIP policy under the guidelines of the Income Tax Act of 1961. Because they have the option to invest in ULIPs and reduce their tax burden, they can save more money. *
In order to boost their savings, an NRI might choose from a variety of financial solutions in India. They can amass a significant corpus at home without paying income tax, which guarantees their financial stability and progress.
Tax Advantages From ULIP For NRIs
For NRIs, there are two kinds of ULIP tax benefits.
They are as follows:
- Tax advantages on premium payments
- Tax advantages for the maturity and claims made after the policyholder has passed away
Let’s examine the ULIP tax benefits offered to NRIs in more detail by reading on:
1. Tax advantages on premium payments
All ULIP policyholders, whether Indian or NRI, are eligible to obtain tax treatment on the premiums they pay under the provisions of Section 80C of the Income Tax Act for their ULIP policy. This act allows 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 be aware that these tax advantages only apply for plans issued after 2012 if the premium amount is equal to or less than 20% of the total guaranteed.
2. Claims for Tax Advantages, Maturity, and Passing Away
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 be required to pay income tax on the maturity sum in accordance with the requirements of this Act.
Otherwise, the nominee will not be required to pay income tax on the amount received as the death benefit if the policyholder passes away.
However, some Section 10 (10D) restrictions 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 less than or equal to 2.5 Lakhs for the ULIP plans issued after February 2021.
How many foreign investors invest in India to benefit from the ULIP tax benefits?
NRIs can invest in India because of the Foreign Exchange Management Act (FEMA). However before making investments in India as an NRI, one must be aware of a difficult documentation process. FEMA makes it possible for NRIs to benefit from ULIP tax benefits by allowing investment in ULIP plans.
The ULIP insurance that best meets an NRI’s financial needs must be found if they want to take advantage of the tax benefits of ULIP policies. NRIs will be required to complete the policy application form and submit the following documents once the ULIP policy is finalised:
– A passport photocopy (Scanned)
– A photo the size of a passport (recent)
– Residence documentation (Indian)
– Residence documentation (overseas)
– Income verification (valid source of income)
– A Form 60 PAN card copy (For the NRIs earning in India)
– Supplemental Questionnaire for Foreign Residency
– A medical checkup (If required by the company)
– A copy of the PIO card (Persons of Indian Origin).
– A copy of your OCI (Overseas Citizenship of India) card, etc.
Generally, NRIs can save a lot of money on taxes in India thanks to ULIP tax incentives. Also, NRIs receive the additional benefit of life insurance with ULIPs in addition to market-linked investment possibilities. ULIPs are a great option for investing in India since they offer you tax advantages on your hard-earned money.
You can utilise a ULIP calculator to estimate future returns and the value of your ULIP investment.