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In ULIP Plan, the investment risks in the investment portfolio is borne by the policyholder

ULIP Plans for NRIs

Non-resident Indians (NRIs) consider ULIP or Unit Linked Insurance Plan as an exclusive opportunity to invest their money. Considering investment opportunities in India, NRIs can invest in ULIPs according to the Foreign Exchange Management Act (FEMA). ...Read More

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ULIP Plans for NRIs
Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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What Is a ULIP?

image-star image-star image-star image-star image-star image-star image-cloud image-cloud image-cloud moon What Is a ULIP?

ULIP stands for Unit Linked Insurance Plan, which is a multi-functional insurance product. This plan combines both investment and life insurance plans. If you are opting for a ULIP plan, you need to pay premiums regularly and a portion of this investment helps in providing life insurance coverage. The remaining amount is then combined with other assets of policyholders and further invested in equities and debts. Opting to invest in ULIP provides financial security and assistance against any urgent needs and lets your money grow over time.

In ULIP, the insurer takes out money from policyholders and invests in the funds they have chosen. After a proper investment of money, the total invested amount is divided into 'units', holding a certain face value. These 'units' are then allocated to respective investors in proportion to investment. Each of these units has a NAV (Net Asset Value) that underlines the value of assets. To better understand how your investment might grow over time, you can use a ULIP Calculator, which helps estimate potential returns based on factors like premium amount, fund choice, and investment duration.

Professional fund managers, after closely monitoring the market fluctuations, handle unit-linked plans and invest a significant portion of the premium. After analysing thoroughly, necessary changes are made again as and when needed.

Once this policy matures, you will receive the total investment amount across all funds. However, if there is a sudden demise of the beneficiary, the nominee gets the high amount from the sum assured or 105% of the premium amount paid to date. 

Best ULIP Plans for NRI in India by HDFC Life

Benefits of ULIPs for NRIs

Through ULIP for NRIs, one can invest in several market-related securities, including equities and debts to yield high returns over investment. As the name suggests, investment in ULIP funds is subject to fluctuations in the market.

Thus, considering your risk appetite and objectives for investment, consider the following benefits that you will get as an NRI after investing in such a scheme:

Market Linked

Market Linked Returns

ULIP offers an opportunity to yield market-linked returns through the proper allocation of a certain portion of premiums in several market-linked instruments that include debt and equities.

Flexibility

Flexibility

Unit Linked Insurance Plans provide flexible opportunities to investors that include:

a) According to needs and desires, switching between different investment funds

b) Adding premiums in investment to assist you with investing an additional sum of money when required

c) Partial withdrawal after meeting the initial 5-year lock-in period

Protection with Savings

Protection with Savings

Apart from paying a certain portion of the premium into debts and equities, Unit Linked Insurance Plans also assist you and your families during times of need. This thereby allows you to avail market-linked returns. ULIP  protects family members in case of demise of the policyholder.

Thus, looking after the well-being of your family you can opt for the ULIP plan. With this plan, you can also build a good habit of saving and investing money along with building substantial wealth over the long run. 

Distribution of Charges

Distribution of Charges

According to IRDAI, the ULIP plan levies a certain charge on investors that is distributed evenly throughout the 5-year lock-in period. This thereby ensures the insurers reduce unnecessary expenses. Thus, make sure to know the charges you will be paying before starting to invest in the ULIP plan.

Level Paying Premiums

Level Paying Premiums

Following a ULIP plan, all premiums follow a uniform payment structure. If any premium payment is done additionally, it is treated as a single premium. This thereby ensures to provision of life insurance coverage. 

Tax Benefits

Tax Benefits

The premiums you pay for ULIP plans are eligible for tax deductions applicable under Section 80C of Income Tax 1961*. This applies for a maximum amount of Rs. 1.5 lakh. On the other hand, the death benefits are exempted from taxes under Section 10(10d) of the Income Tax Act 1961. Upon receipt of maturity benefits, tax exemption would be available subject to criteria prescribed u/s 10(10D)*.

Key Features of ULIPs for NRIs

as an NRI if you are planning to invest in a ULIP scheme, these are the features you can look up to with your investment:

1

Investment Allocation

This is the key feature of ULIP for NRI schemes you can choose to invest in considering your risk appetite. You can enjoy both the benefits of debt and equity funds. Even after investment, you can invest your future premiums towards your chosen fund through this feature. 

2

Switching of Funds

If there are fluctuations in the market or your investment needs change, you can switch between funds. The ability to switch funds is a key feature of ULIPs. This provides flexibility in your investment as well according to your requirements. Alongside, you can divert your investment into debt funds when there is a slowdown in the market and then return to equities during market stability.

This is accessible in the same plan and without any additional charges.

3

Top-ups

With this feature, you can choose to change investments from time to time. ULIP plan offers a distinguishing feature of investing an additional amount over the existing investment plan. Opting for this plan, you can fetch a larger amount during the end of the tenure of the plan

4

Partial Withdrawal

You can withdraw money from your chosen ULIP plan as and when required. However, during times of emergency, you can opt for fund withdrawal after the tenure of a lock-in period of 5 years. The number of times you can withdraw money and the cap on withdrawal amount depends on the ULIP plan chosen

5

Tax Savings

Tax savings are a distinguishing feature of ULIPs for NRIs. The premiums you pay towards ULIP are completely tax-free up to Rs. 1.5 Lakh per annum under Section 80C of the Income Tax Act, 1961*. Not only this but upon maturity, the amount you will receive is also tax-free under Section 10(10D) upon satisfying conditions mentioned u/s 10(10D)*, although, death benefits are completely tax free.

6

Multiple Options for Premium Payment

With this option, NRIs can pay multiple premiums at their convenience. For regular payment, you can opt for a single premium payment option. Or else, you can choose to pay monthly, annually or half-yearly. 

How to Invest in ULIPs for NRIs

Considering their financial goals and risk appetite, NRIs can apply for a ULIP plan online. Applying online for your chosen plan is easy and hassle-free. Following are the documents mandatory to provide during the application process:

  • Scanned passport copy
  • Address Proof
  • OCI or PIO card as per KYC norms
  • Income Proof
  • A copy of the PAN card or Declaration in lieu of PAN card
  • A foreign residency supplementary questionnaire
  • Medical tests if the insurance company asks for

NRIs, however, can pay the premiums through online mode via the bank account of individuals. Such individuals are supposed to have a Non-Resident External (NRE) or Non-Resident Ordinary Rupee Account (NRO) for depositing money earned from India and abroad. Or else, NRIs can also refer to foreign currency remittances or these accounts for payment. This, however, completely depends on the denomination in which the policyholder has issued the account.

If the denomination is in Indian Rupee, NRIs can pay the premium amount through an NRO account. 

Documents required by NRIs to invest in ULIPs in India

Every NRI should keep the following documents ready to purchase the required life insurance plan. The documents are:

  • Age Proof: Documents such as birth certificate and passport
  • Identity Proof and Address: A passport copy is required. Some companies even ask for valid documents such as national identity cards or resident card
  • Income Proof: Bank statements, salary slips, and tax documents from the country you are residing in act as income proof
  • Medical History: Considering your insurance company’s policy, it is mandatory to disclose your medical history through medical tests
  • Scanned passport copy
  • OCI or PIO card as per KYC norms
  • A copy of the PAN card or Declaration in lieu of PAN card
  • A foreign residency supplementary questionnaire

Key Considerations for NRIs When Investing in ULIPs in India

When NRIs consider investing in Unit Linked Insurance Plans (ULIPs) in India, there are several key factors they need to keep in mind to make informed decisions. Here are the primary considerations:

1

Regulatory Compliance

NRIs must ensure that they comply with the regulatory requirements set by the Foreign Exchange Management Act (FEMA) and the Reserve Bank of India (RBI). Understanding the legal framework governing NRI investments is crucial to avoid any legal complications.

2

Investment Goals and Risk Appetite

NRIs should clearly define their financial goals and assess their risk tolerance. ULIPs are market-linked products, and the returns are subject to market risks. It is essential to choose a plan that aligns with their investment objectives and risk profile.

3

Currency Exchange Rates

The fluctuation in currency exchange rates can significantly impact the returns on ULIP investments for NRIs. Monitoring and understanding these fluctuations will help in better financial planning and optimizing returns.

4

Taxation Rules

NRIs should be aware of the tax implications of investing in ULIPs. While premiums paid for ULIPs are eligible for tax deductions under Section 80C of the Income Tax Act, the tax treatment of maturity proceeds and partial withdrawals can vary. Consulting with a tax advisor can provide clarity on these aspects.

5

Policy Issuance and Servicing

The process of policy issuance and servicing might differ for NRIs compared to resident Indians. NRIs need to provide specific documents, such as a copy of the passport, visa, and proof of overseas address. Understanding the documentation requirements and the process involved will ensure a smooth experience.

6

Repatriation Benefits

NRIs should verify if the ULIP plan offers repatriation benefits, which allow the policyholder to transfer the maturity proceeds and other payouts to their country of residence. This is a critical factor for those planning to repatriate funds.

7

Fund Options and Performance

Evaluating the fund options available under different NRI ULIP plans is essential. NRIs should review the historical performance of these funds, the fund manager’s track record, and the fund’s investment strategy to make an informed decision.

By considering these factors, NRIs can make well-informed decisions about investing in ULIPs in India, ensuring that their investments align with their financial goals and risk appetite while complying with the necessary regulations.

Tax Benefits for NRIs Investing in ULIPs

Here is a detailed overview of tax benefits for investing in ULIP for NRI plans:

  • Tax Benefits on ULIP Premiums

All NRIs and Indian citizens opting for the ULIP plan are subjected to tax exemption on the premiums paid. Under Section 80C of the Income Tax Act, NRIs are allowed for a deduction of Rs. 1.5 Lakhs on the premium paid. However, if the ULIP premium is upto Rs 2,50,000 and is equal to or less than 10% of the sum assured, NRIs are eligible to claim exemption on maturity benefit. under Section 10(10D) of the Income Tax Act, 1961.

  • Tax Benefits on Death and ULIP Maturity

NRIs can avail exemption of taxes on death benefits on sudden demise of the policyholder while holding the ULIP policy, applicable under Section 10(10D) of the Income Tax Act.

For maturity, NRIs enjoy the benefits of taxes, subject to the provisions mentioned below:

  • For plans issued on or after February 2021, on maturity, NRIs can avail of tax benefits only when the total premium paid is equal to or less than Rs. 2.5 Lakhs in any of the previous years till the policy term exists.
  • For ULIP plans purchased before February 2021, NRIs can avail tax exemptions only if the premium is less than 20% of the sum insured

On the other hand, if the premium annually is more than Rs. 2.5 Lakhs, there will be capital gains tax. This applies however on the ULIPs purchased after February 1, 2021.

Under any unforeseen circumstances, if any NRI withdraws the ULIP policy before the lock-in period of 5 years, the amount surrendered gets added up with the annual taxable income of the NRI and following the slab rate is subjected to taxation. However, if the ULIP policy is surrendered after 5 years, there are no charges applicable.

Furthermore, NRIs face double taxation for which their overall income is affected. The income tax applicable to NRIs is however much greater compared to Indian permanent citizens. Thus, to avoid paying double taxation, it is mandatory to go through the Double Taxation Avoidance Agreement (DTAA). With many foreign countries, India has tied up with DTAA, where an NRI can claim exemption from paying taxes in any one of the two nations.

Choosing the Right ULIP for NRIs

With a proper understanding of the ULIP for NRI plan, the next and foremost plan is selecting the ideal one from a varied set of options. Thus, before you start investing in a ULIP plan, make sure to choose the right one. For NRIs, choosing the right ULIP might be a challenging task. Following the below-mentioned factors will enable you to choose the right one conveniently:

Main Purpose Of Purchasing Ulip

Main Purpose of Purchasing a ULIP

ULIP plan is ideal for investors looking to invest in several funds with some goals in mind. An NRI investor might have a goal set to prepare children for higher education that involves more risks. On the other hand, to create a lump sum amount for investment you also need to make yourself stay safe and secure.

To achieve these desired financial goals, purchasing a ULIP plan is beneficial.

Premium Funding

Premium Funding

This is another advantageous benefit of the ULIP Plan. This feature ensures the policy keeps on functioning even after your death. Incorporating this feature, a policy considers payment of premiums after your sudden demise and continues till maturity. This will be of utmost importance if an NRI plans for children's education in the long term.

Select The Optimum Coverage

Select the Optimum Coverage

Once you expire during the policy, your family will get all the benefits of death. Apart from investment, a ULIP plan also consists of a life insurance portion. Moreover, choose the optimum life insurance coverage considering the future needs of your family. This way, it will be possible to make your family stay financially stable even in your absence. 

Switch Funds

Switching of Funds

With this facility, a NRI can switch between funds invested. However, there is a limitation on how many switches you can do with ease. 

Policy Charges

Policy Charges

ULIP plans consist of charges that include fund management charges, premium allocation charges and so on. Thus, before you purchase your plan, go through all these charges. Opt for the ULIP policy that charges the least.

Top ULIPs for NRIs

ULIP is an insurance plan combining investment and insurance. Non-resident Indians find this life insurance plan an attractive option because of the potential to create wealth and provide comprehensive life coverage, along with building a retirement corpus.

Here is a list of top ULIP for NRI plans beneficial in different scenarios:

FAQs on ULIP Plans for NRIs

1 What is a ULIP?

ULIP is a life insurance policy combining both insurance and investment. It offers comprehensive life insurance coverage allowing policyholders to invest in various plans considering financial goals and risk appetite. 

2 How can NRIs invest in ULIPs?

By choosing a desired plan and after completing the necessary documentation, NRIs can invest in ULIPs online. They can pay premiums through NRE, and NRO accounts. 

3 Are there any tax benefits for NRIs investing in ULIPs?

Yes, for NRIs investing in ULIPs, there are tax benefits available under Section 80C of the Income Tax Act. Here the premiums paid are deducted up to Rs. 1.5 Lakhs. However, NRIs must consider the implications of taxes according to their country of residence. 

4 Can NRIs switch funds within a ULIP?

Yes, NRIs can switch funds within a ULIP. This thereby allows them to avail options of investment between different other funds such as equities and debts. Free switching of funds is allowed each year, after which an additional amount is charged for switching. 

5 What are the charges associated with ULIPs?

The charges associated with ULIPs are premium allocation charges, policy administration charges, fund management charges, mortality charges, switching charges and discontinuance charges.

* Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions. Tax Laws are subject to change from time to time. Customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law.

In unit linked policies, the investment risk in the investment portfolio is borne by the policyholder. The Unit Linked Insurance products do not offer any liquidity during the first five years of the contract. The policyholders will not be able to surrender/withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of fifth year.

Unit Linked Life Insurance products are different from the traditional insurance products and are subject to the risk factors. The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. The name of the company, name of the brand and name of the contract does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your insurance agent or the intermediary or policy document of the insurer. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.For Single premium, the special addition is 1% of the Single premium at inception only.

1. Provided all due premiums have been paid and the policy is in force.

3. Provided all due premiums have been paid.

4. ROP – Return of Premiums. This applies to Income variant, whereby all base premiums are returned to policyholder on survival of Life Assured at maturity, provided all due premiums are paid during the premium payment term.

5. This feature is available in select products under the savings category. Please read the product brochure of your selected product to know the details.

6. In the case of Joint Life annuities the payout continues till either of the lives chosen in the policy is alive.

8. The age mentioned is the age as per the last birthday.

12. Available under Level Cover with Capital Guarantee and Decreasing Cover with Capital Guarantee plan options

17. Quantum of benefits is guaranteed irrespective of the experience.

#Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions. Tax Laws are subject to change from time to time. The customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax lsiabilities under the Income-tax law.

ARN: MC/06/24/12160