"Protect your family and wealth—no matter where you are!" Life insurance is an easy way to secure your loved ones. It provides your family with financial protection if something unforeseen happens to you.If you are a Non-Resident Indian (NRI), you can even purchase life insurance in India. In addition to providing financial security for your family, life insurance policies in India can also assist in NRI taxation. Throughout the tenure of the policy, you can avail tax benefits under NRI tax in India rules. Read ahead to learn about life insurance tax benefits for NRIs.
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A Non-Resident Indian (NRI) is an Indian citizen residing abroad for business, employment, or other purposes. Even though you are settled abroad, you can purchase a life insurance policy for NRI in India to secure your family and avail of tax benefits back home. You're considered an Indian Resident if you meet either of these conditions:
You stayed in India for 182 days or more during the previous year, or
You were in India for at least 60 days in the last year and for a total of 365 days or more in the 4 years before that.
If you don’t meet the conditions mentioned above, you’ll be considered a Non-Resident Indian (NRI) in India.
The Indian financial ecosystem offers various tax benefits to attract NRIs to invest in life insurance policies in India. The tax benefits of life insurance were introduced under the Income Tax Act of 1961, given that NRIs, too, have family responsibilities. Here are a few tax benefits NRIs could capitalise on.
Under Section 80C of the Income Tax Act, NRIs can claim a tax deduction on life insurance premiums. The cap on deduction claims is one and a half lakh rupees (₹1,50,000).
If you have health-related riders such as critical illness on your life insurance policy, you get a Section 80D tax deduction even if you're an NRI. According to income tax laws for NRIs, these are the ones that you can claim:
These advantages are included in the NRI tax slab in India and can actually lower your taxable income.
Any sum received as a policy maturity or death benefit is tax-free under Section 10(10D) for NRI. Note that tax benefits are subject to amendments made by the government from time to time. Hence, to get a clear picture, please consult a tax advisor before buying any policies.
India has signed DTAA, or Double Taxation Avoidance Agreements, with several countries. Under the DTAA, NRIs can claim tax relief from their country of residence for the taxes they've paid in India. The agreement ensures that NRIs are not taxed twice on the same income and can benefit from lower withholding tax rates.
Also read: NRI Life Insurance Claim Process
NRIs must comprehend these dynamics to maximise their life insurance tax benefits properly.
NRIs can opt for life insurance tax benefits by following the given steps.
Select a life insurance plan from an insurance provider (Indian company) that aligns with your financial goals.
Check your eligibility as an NRI under Indian tax laws.
Acquire the policy and send in the necessary paperwork.
Use foreign currency remittance or NRE/NRO accounts to pay premiums.
According to Income Tax Act Section 80C, you can claim a tax deduction for premiums.
Recognise how death benefits, maturity proceeds, and cash value withdrawals are taxable for non-resident individuals (NRIs).
When filing tax returns, adhere to the reporting requirements for life insurance plans held in India.
Consult financial planners or tax experts specialising in cross-border taxation for assistance on the best tax planning techniques.
Life Insurance is considered one of the most crucial aspects of financial planning. If an NRI invests in a life insurance plan, they can expect the following advantages.
To buy life insurance policies in India, NRIs must satisfy specific eligibility criteria. Here are the details.
While availing of life insurance tax benefits, NRIs can select a few additional riders.
It improves beneficiaries' financial security by paying more money if an accident results in the insured's death.
It helps NRIs manage their finances during medical emergencies by providing a lump sum payment following the diagnosis of certain serious illnesses.
This policy provides coverage without putting NRIs at financial risk by waiving future premium payments if the insured is permanently handicapped.
This rider ensures a steady flow of money to the beneficiary in the event of the insured's death, giving dependents continuous financial support.
This provides flexibility and long-term coverage by enabling the conversion of a Term Insurance policy into a permanent life insurance policy without medical underwriting.
This section highlights the different types of life insurance policies available for NRIs.
Selecting the right policy to receive tax benefits as an NRI is important. Some key factors that should be considered during the selection process are:
Be clear about your needs and what you seek from the plan. Understanding the NRI tax slab in India and how it affects your premium payments and payouts.
Look for the different options by doing proper research. Check reviews and ratings in this process.
Compare the premiums offered by each available policy. Compare with your budget.
Assess flexibility in terms of payout, coverage, etc. Plans like the ACKO Life Flexi Term Plan offer extensive flexibility and customisation. Evaluate policy features and the riders available.
The main factors that influence the life insurance tax benefits for NRIs are:
Understanding your needs and budget is important to choosing the right plan that best fits your needs. A term insurance calculator can help you calculate your premium based on factors like age, health, coverage amount, and policy term. This lets you analyse plans and choose smartly while staying within your budget. You can even explore comprehensive coverage options, such as the best term insurance plan for 1 crore at an affordable price.
One of term insurance's best benefits is its affordability. It is an excellent choice for people looking for short-term financial security for their family. On the other hand, permanent life insurance policies usually have higher premiums but provide lifetime coverage and other advantages, including the potential for investment growth and the accumulation of financial value over time.
Life insurance tax benefits for NRIs present an opportunity to minimise tax obligations and provide financial security for loved ones. By being aware of India's tax laws and rules regulating life insurance contracts, NRIs can take advantage of several tax breaks and exclusions provided by the Income Tax Act. To conclude, NRIs can confidently accomplish their financial goals and provide complete safety for their families by successfully utilising the tax benefits associated with life insurance
Below are some of the frequently asked questions on Life insurance tax benefits for NRIs
Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.
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