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You are considered to be an Indian resident based on the number of days you spend living in the country. If you reside in India for 182 days or more during a fiscal year (1st April to 31st March), you are considered a resident for taxation purposes. A non-resident Indian (NRI) is a person who stays in India for less than 182 days during a financial year.
If you are an NRI having strong roots in the country, you should consider purchasing insurance in India. Most insurance companies offer NRI insurance policies such as investment plan, child education plan, life insurance, etc. based on certain conditions.
Here are seven things you must know when you want to purchase NRI life insurance in India.
You must hold a valid passport issued by the Indian Government. Alternatively, you or your parents or grandparents were Indian citizens under the Citizenship Act, 1955 or by virtue of the Indian Constitution. You may also buy insurance in India if you are married to an Indian citizen.
2. Documents required
You may complete the paperwork to buy a life insurance policy during your visit to the country. Alternatively, you may complete the documentation in the country of your residence. Some insurers allow you to avail of insurance through a mail order. However, you need to pay for the medical tests from your own pocket.
In case you are availing of coverage for a high sum assured or buying through a mail order, you need to submit a certified Chartered Accountant’s (CA) certificate. Although you may provide an international communication address, you must have a permanent Indian address. Some insurance companies may also require you to complete NRI forms and questionnaires.
3. Premium payable
In most cases, the premium for life insurance for NRI is the same as that of a resident. However, if you live in a high-risk country, you may have to pay a higher premium. Insurance companies provide several payment modes to their NRI clients. Some of these include net banking, electronic clearing system (ECS), non-resident ordinary (NRO) or non-resident external (NRE) bank accounts, and cheque.
4. Coverage offered
Insurance companies may not offer high-value insurance plans without taking medical tests in India. Some insurers also impose a maximum limit on the sum assured.
5. Claim payout
All claims, surrender value, and maturity proceeds need to be paid in the domestic currency. From the total premium payable, you may receive foreign currency payment proportionately based on the premium amount you paid in the international currency. In case a death claim is filed, your survivors will need to submit a certificate attested by the Indian Embassy or High Commission from the country of your residence.
6. Tax benefits
The tax benefits are same for residents and NRIs. Under Section 80C of the Income Tax Act, 1961, you may save up to INR 1.5 lakh every year. Maturity and death benefits are not taxable. If you repatriate maturity proceeds, these are treated based on the double tax avoidance treaties between the countries.
7. Repatriation of proceeds
All the proceeds under your insurance plan may be repatriated outside the country based on the account used for making payments. Maturity proceeds and death claims are allowed to be repatriated in the proportion to the premium paid in foreign currency out of the total premium paid. If you made payments in domestic currency, no repatriation is allowed.
More than 23 insurance companies provide insurance to NRIs. You must consider the reputation of the insurer, claim settlement ratio, and track record before making your choice. You may take assistance from representatives of the insurance company who provide guidance on how to buy NRI insurance plan in India.
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