For non-resident Indians (NRIs) securing the right insurance for them and their families back home is a crucial financial decision. Health and term insurance ensure access to quality healthcare and financial security in times of need.
What makes Indian insurance policies appealing is their affordability compared to global alternatives, extensive coverage, and the added advantage of tax benefits. Insurance in India is not just about safeguarding loved ones—it’s also a financially smart move for NRIs.
GST refund on health and term insurance premiums
Health and term insurance policies in India are typically subject to an 18 percent Goods and Services Tax (GST). However, NRIs have an advantage: they can claim a refund of the GST, which makes Indian insurance policies more affordable. The government has introduced this exemption to encourage NRIs to buy Indian insurance plans.
To qualify for the GST refund, certain criteria need to be met:
1. The proposer of the policy must be an NRI and must also be insured under the policy. This means NRIs can buy policies for themselves or their family members in India, but they must also be covered as an insured member to avail the GST exemption.
2. Premium payments must be made from a Non-Resident External (NRE) account.Only payments made from such accounts are eligible for the GST refund.
3. Premiums must be paid annually. Monthly or quarterly payments do not qualify for the exemption.
Once these criteria are met, NRIs need to submit their KYC (Know Your Customer) documents.
Insurers will also ask for a PAN card, proof of an Indian and international address, an NRE bank account statement, passport, and a visa with entry/exit stamp. Once the policy is issued, the GST refund process typically takes up to 15 days.
Tax benefits on life insurance
Section 80 C of the Income Tax Act is a popular tax saving option. NRIs purchasing life insurance policies, including term insurance, can claim deductions for the premiums paid under this section per the old tax regime. The maximum deduction allowed is Rs 1.5 lakh per year. This reduces your taxable income, resulting in tax savings, and makes your insurance more affordable.
Health insurance deductions
If you're paying premiums for health insurance policies covering yourself, your spouse, children, or parents, you can claim deductions on the premiums paid under section 80 D.
The deduction depends on who you're insuring. You can deduct up to Rs 25,000 from your income for premiums paid for yourself, your spouse, or your children. If you're insuring senior citizens, this limit increases to Rs 50,000.
Additionally, if you're purchasing health insurance for your parents, you can claim up to Rs 25,000 for your parents and Rs 50,000 if they are senior citizens. This makes it easier to plan for the health and well-being of your loved ones while also benefitting from tax savings.
Secure your family's future
In addition to tax benefits, term insurance is an essential tool for securing your family’s financial future. If you’re living abroad, term insurance can provide peace of mind, knowing that your family will be financially protected in case something happens to you. Term insurance is usually the most affordable way to ensure that your family’s future is secure.
The death benefit received from a term insurance policy is completely tax-free under Section 10 D of the Income Tax Act. This means that your family will receive the full insurance payout without any tax deductions, which is a major benefit of term insurance in India.
Insurance companies in India offer flexible premium payment options, making it easier to manage your premiums remotely. While many insurers allow payments to be made annually, quarterly, or monthly, the GST exemption applies only when premiums are paid annually. Payments can typically be made online, so managing your premiums from abroad is straightforward.