Tax Benefits On ULIP Pension Plan For NRIs

Tax Benefits On ULIP Pension Plan For NRIs 

For NRI investors, ULIP pension plans have numerous advantages. Let's start by understanding the definition of a ULIP policy to learn more about ULIP benefits, and specifically, ULIP tax benefits, for non-resident Indian investors.

What is a ULIP policy?

A Unit Linked Insurance Plan, sometimes known as a ULIP policy, is a type of investment that enables investors to take advantage of both financial potential and insurance protection

Another one of the numerous ULIP Benefits to look forward to is the possibility of market-linked returns being offered to policyholders by these funds. You can use a ULIP calculator to estimate future returns and the value of a ULIP investment.

Are NRIs able to buy ULIPs in India?

Without a doubt, non-resident Indians (NRIs) can invest in ULIPs in India. NRIs are allowed to invest in India under the Foreign Exchange Management Act (FEMA), which also allows investing in unit-linked insurance plans.

NRIs who want to buy ULIPs in India can do so. The ULIP calculator is a simple tool that you can use to predict the return you might get at maturity by entering a few details.

How are ULIP pension plans available to NRIs in India?

If you are an NRI and want to take advantage of ULIP tax benefits, you may do so by weighing your demands against the available options and choosing a plan that fits them. Once you decide on a plan, you must complete the application and provide the required paperwork. 

These are often the justifications you'll need to invest in ULIPs if you're an NRI:

●       A digital copy of your passport, which serves 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 persons of Indian origin (PIO) card as evidence of income

●       A copy of your form 60 or pan card, if you have income from India.

●       An NRI or PIO foreign residency supplementary questionnaire and any necessary medical examination reports

●       Any further paperwork that would be needed in terms of KYC and AML 

NRIs may use any of the following accounts to pay the insurance company's premiums:

●       Any bank account in India

●       Any NRE or NRO account kept with a bank in India

●       NRIs may also pay the premium regularly using any of the options listed below.

●       Foreign or domestic credit cards

●       Web-based banking

●       Bank cards

●       Online wallets like Google Pay and Paytm

●       Steps for Credit Card Standing (CCSI)

●       Automated Clearing House of the Nation (NACH)

How might ULIPs reduce NRIs' income tax obligations?

Now that you are aware of the general process let's examine the ULIP tax advantages offered to NRIs.

1.      Tax advantages on premium payments

If the premium is less than or equal to 10% of the capital sum assured (for ULIP policies purchased on or after April 1, 2012) or up to 20% of the capital sum assured prior to April 1, 2012, the taxpayer may deduct the premiums paid for ULIPs up to Rs. 1.5 lakh from their taxable income. A ULIP purchase by an NRI qualifies for this deduction as well.

2.      Tax benefit on benefits at death or maturity

According to section 10(10D) of the Income Tax Act of 1961, in the event of the policyholder's passing while the plan is in effect, the death benefits obtained by the nominees are not subject to taxation.

Keep in mind that the Key Man Policy's death benefit is taxable, subject to the conditions indicated therein. According to the terms of the same section, the policyholder's maturity benefits are also tax-free, provided that they meet the following requirements. 

This benefit is available 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 prior to April 1, 2012, the benefit under Section 10(10D) may be used. 

The maturity funds will only be tax-free under the new Budget 2021 rules if the annual premium paid is less than Rs. 2.5 lakh and the aforementioned Section 10(10D) requirements are met.

The income or returns upon maturity from ULIP investments over Rs. 2.5 lakh are liable to capital gains tax. Only insurance contracts bought on or after February 1, 2021, are subject to this.

3.      Capital gains taxation

Long Term Capital Gains (LTCG) tax is not applied to gains on ULIP plans as long as the annual premium paid is less than Rs. 2.5 lakh. These ULIP advantages are also available to NRIs. 

The tax benefits mentioned in the article may not apply if you opt for the new tax regime since many tax exemptions and deductions have been scrapped within the new regime. They are also subject to any changes in the law. 

Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.