What is a ULIP policy?
A type of investment called a unit-linked insurance plan, or ULIP for short, allows investors to benefit from both profit potential and insurance cover. The life insurance provided by the insurer serves as a safety net for the policyholder’s loved ones. The policyholder may also decide to invest in their chosen debt or equity funds. The potential for these funds to provide policyholders with market-linked returns is one more of the many ULIP advantages to look forward to.
The ULIP calculator is a simple and easy to use tool that you can use to predict the return you might get at maturity by entering a few details.
Are NRIs able to buy ULIPs in India?
Non-resident Indians (NRIs) can unquestionably invest in ULIPs in India. The Foreign Exchange Management Act (FEMA), which permits investing in unit-linked insurance policies, permits NRIs to make investments in India. So long as they comply with all Know Your Customer (KYC) requirements for investing in such life insurance-investment plans, NRIs who want to buy ULIP plans in India can do so.
How are ULIP pension plans made available to NRIs in India?
By comparing your needs with the available options and selecting a plan that meets them, NRIs who desire to profit from ULIP benefits can do so. Once you’ve chosen a plan, submit the application along with the necessary documentation.
These are often the reasons you’ll need to invest in ULIPs if you’re an NRI.
- A digital copy of your passport, which is used as identification and proof of age.
- An updated passport-sized photo
- Proof of Indian residency
- Proof of abroad residency
- Overseas Citizenship of India (OCI) or People of Indian Origin (PIO) card as evidence of income
- Copy of form 60 or pan card if you have income from India.
- An NRI or PIO foreign residency supplemental questionnaire and any other medical examination reports
- Further paperwork that would be needed for KYC and AML
These records are necessary for your insurer to comply with the relevant Know Your Customer (KYC) and anti-money laundering laws.
NRIs can utilise any of the following accounts to pay the insurance company’s premiums:
any bank account in India
- Any NRE or NRO account that is kept with a bank in India
- NRIs may also pay the premium regularly using the options listed below.
- Foreign or domestic credit cards
- Web-based banking
- Bank cards
- Internet wallets like Google Pay and Paytm
- Steps for Credit Card Standing (CCSI)
- Automated Clearing House of the Country (NACH)
How might ULIPs reduce NRIs’ income tax obligations?
1. Tax advantages on premium payments
The taxpayer may deduct the premiums paid for ULIP plans up to Rs. 1.5 lakh out of their taxable income if their premium is equal to o less than 10% of the capital sum assured (for ULIP policies that are purchased on or after April 1, 2012) or up to 20% of the capital sum assured prior to April 1, 2012. This deduction is also applicable to ULIPs bought by NRIs. **
2. ULIP tax benefits on benefits at passing away or maturity
The death benefits received by the nominees in the case of the policyholder’s passing while the plan is in operation are not taxable, in accordance with section 10(10D) of the Income Tax Act of 1961. Keep in mind that, if the Key Man Policy’s conditions are met, its death benefit is taxable. The policyholder’s maturity benefits are likewise tax-free under the rules of the same section, provided that they adhere to the following conditions.
These ULIP tax benefits are offered for ULIP plans bought on or after April 1, 2012, provided that the premium is less than or equal to 10% of the capital sum insured.
When the premium is less than or equal to 20% of the capital sum assured for ULIPs purchased before April 1, 2012, the benefit under Section 10(10D) may be used.
According to the new Budget 2021 regulations, the maturity funds would only be tax-free if the yearly premium is less than Rs. Capital gains tax is due on any income or returns from ULIP investments that are more than Rs. 2.5 lakh when they mature. This only applies to insurance policies purchased on or after February 1, 2021.
3. Capital gains taxation
Long Term Capital Gains (LTCG) tax is not applied to gains on ULIPs as long as the annual premium paid is less than Rs. 2.5 lakh. These ULIP benefits are also available to NRIs.
You can utilise a ULIP Calculatorto estimate future returns and the value of a ULIP investment.