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SIP for NRI

A Systematic Investment Plan (SIP) is popular because it is simple and easy to understand. Individuals can allot funds according to their capacity and do not require huge amounts to start the investment journey. Likewise, SIP for NRI has also gained popularity worldwide. Digitisation of the investment process has made it more convenient. Read on for information about the prospects of the systematic investment plan for NRIs, the benefits, and the tips to follow before investing. 

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SIP for NRI

SIP for NRI: A Smart Way to Invest and Secure Your Future

SIP for NRI: A Smart Way to Invest and Secure Your Future
January 03, 2025

Table of Content

 

What is a SIP with Life Insurance Cover?

SIP with life cover is a ULIP plan where you can choose a ULIP fund and invest a small amount regularly. You can automate the deduction to transfer the fixed amount from your bank to the SIP with the life cover of your choice.

The advantage of ULIP plans for NRI is that they can systematically invest small amounts. This inculcates discipline and consistency in savings and provides a substantial yield in the long run.

Why NRIs Are Choosing SIP Investments

NRIs look at SIP investments as an organised way of investing funds to earn huge returns over time. Moreover, the growth track in the Indian investment market and the proven benefits of this systematic investment have drawn more NRIs towards SIP for NRI.

Another attraction is the interest-compounding aspect, which creates a considerable corpus if they stay invested for prolonged periods. Further, the required minimum investment is Rs 500, which makes it affordable for a larger population.

Benefits of SIP Explained

The benefits of SIP for NRI abound. They are:

  • Flexible Investment Options

The SIP investment for NRIs allows them to choose the funds in ULIP plans to align with their risk tolerance and financial goals. With the choice of fixed amounts and the facility to pause or stop contributions, they can adjust according to changing market trends and personal circumstances.

  • Better Returns

SIP for NRI is a risky investment for NRIs compared to a conservative savings plan like fixed deposits. However, it is a preferred investment alternative as it provides higher returns if the NRIs stick to the plan for longer periods.

  • Power of Compounding

In SIP plans for NRI, returns are reinvested to generate further returns. This is the power of compounding that multiplies returns over time and enables small investments to generate significant corpus over time.

  • Simplified Management

A diversified portfolio in ULIP funds is important when you invest huge amounts. The systematic investment of small amounts makes SIP for NRI manageable. It is much easier to readjust SIP according to changed market conditions and financial goals.

  • Benefits of Rupee Appreciation

SIP for NRI also provides a currency conversion advantage. If the conversion value increases, there is scope for higher returns.

How Does SIP in a ULIP Plan Work?

NRIs contribute a fixed amount determined at the time of purchase towards SIP for NRIs. SIP invests a fixed amount in ULIP funds. NRI can buy funds on a predefined date. SIP offers flexibility in making subscriptions at either monthly or quarterly intervals.

Every time a fixed amount is credited to SIP, you buy certain units of funds depending on the market condition. If the market is low, you can buy more units and units when it is high. Owing to this method, you benefit from the investment when the market is bullish or bearish.

Can NRIs Invest in SIPs with Life Cover in India?

The eligible candidates for SIP with life cover are NRIs, Overseas Citizens in India (OCI), and Persons of Indian Origin (PIOs). NRI SIP investments do not require any special regulatory permissions, including RBI.

What are SIPs for NRIs in ULIP?

SIP in ULIP is a simple and easy investment plan for residents as well as Non-resident Indians. It does not need any expertise in the investment field.

NRIs have two options for investing in ULIP funds through SIP. They are the repatriable and the non-repatriable options. For the repatriable option, they should have an NRE or FCNR account in an Indian Bank and an NRE or NRO account for the non-repatriable option.

How Can NRIs Invest in SIPs with Life Cover?

Non-resident Indians can invest in SIP plans for NRI only after opening an NRE or NRO account, depending on whether they choose the repatriable or non-repatriable plan. Thereafter, they have to submit soft copies of the required documents for online KYC registration.

Online KYC

KYC or Know Your Customer registration is the first step to start investing in NRI SIP investments. The NRIs have to upload their official photo identification and address proofs, which will be verified through IPV, i.e., In-Person Verification.

Documents Required

The documents required for KYC registration are:

  • Filled and signed the KYC form
  • Self-attested PAN and Passport for ID verification
  • Inland and overseas address proof for NRI verification

In-Person Verification Steps

For the in-person verification of the documents submitted electronically for SIP investment for NRI, the NRIs have to submit the original documents to the fund house. The KYC is deemed completed only after the in-person verification. There are two ways to do in-person verification.

  • Offline Method

The NRI can visit the fund house personally, or fund house personnel can visit the NRI’s workplace or residence to verify the original documents.

  • Online Method

Online KYC for NRI investors involves live authentication through video conference at a suitable time. An internet connection is a prerequisite for verification through this method. The personnel may ask a few questions regarding the information in the KYC form. If there is a mismatch in the details, they may reject the application.

How Are NRIs Taxed on ULIP Investments?

NRIs hesitate to invest in Unit linked plans as they are sceptical about dual taxation. However, if India has signed a DTAA (Dual Taxation Avoidance Agreement) with their resident country, they are not liable for dual taxation. The NRI taxation for ULIP is mentioned below:

  • ULIPs with Tax Benefits

The investment in ULIP policies issued on or after 01-02-2021 shall be exempt for NRIs under section 10(10D) of Income Tax Act, 1961# if the below conditions are satisfied – 

a) The premium paid is not in excess of 10% of the actual capital sum assured (i.e. death sum assured) throughout the policy term.  

b) If the premium payable for any year during the term of policy does not exceeds INR 2.5 lakhs and

c) Aggregate annual premium should not exceed Rs. 2.5 lakh for all policies held by the policyholder with all life insurers for policies issued on or after February 1, 2021

ULIPs with Taxable Returns

The maturity proceeds under ULIP plans for NRI are liable to capital gains if any of the above condition are not satisfied for policies exceeding premium of Rs 2.5 lakh,. However, the death benefits are tax-free irrespective of the extent of an annual premium.

  • Short-term Capital Gains

Short term capital gains is not applicable on ULIP as 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 or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of fifth year.

  • Long-term Capital gains (LTCG)

Long term capital gains (LTCG) is levied on ULIP plan at the rate of 12.5% without indexation if the gains in a financial year are beyond Rs. 1.25 lakh Eligibility for Tax Deductions

The premiums paid towards ULIP by NRIs are eligible for deduction up to Rs. 1.5 Lakh per annum under Section 80C of the Income Tax Act, 1961#.

Key Considerations for NRI Investors

There are some specifications for long-term investments for NRIs in investment plans, such as SIP for NRIs. The aspects that NRIs have to consider before investing in SIPs are:

  • Eligibility

Non-resident Indians (NRIs), Persons of Indian Origin (PIOs), and Overseas Citizens in India can invest in SIP for NRI.

  • Available Currency Choices

Premium payment options for NRIs involve the choice to pay in Indian rupees or any other currency as per the terms and conditions stipulated by the insurance provider.

  • Required Documents

NRIs have to produce valid ID proof, address proof, income proof, and NRI status proof to invest in SIP for NRI.

  • Available Payment Options

The premium payments can be through NRE/NRO accounts, wire transfers, foreign inward remittances, or international credits.

  • Tax Benefits

Eligibility for deductions under Section 80C and exemption under Section 10(10D) of the ITA 1961 are tax benefits for NRIs for investments under SIP for NRI.

  • Benefits at Maturity

If the annual premium towards SIP for NRI is below Rs. 2.5 lakhs, the maturity benefits are tax-free. However, the proceeds may be taxable under the home country tax rules.

  • Available Fund Choices

Equity and debt SIP for NRIs are the fund options under SIP for NRIs. Equity SIPs involve investments in stocks which are risky but provide high returns. Debt SIPs are fixed-income securities, such as bonds and government securities, which are safe and provide stable returns.

  • Transferring Funds Back to Your Home Country

Maturity proceeds can be repatriated to the home country. Adhering to RBI and FEMA guidelines while transferring the funds is mandatory.

Physical SIPs vs. Digital SIPs for NRIs

Earlier, when physical SIPs were in vogue, investors had to maintain the investment record on paper. They had to visit banks, financial institutions, or Asset Management Companies personally to manage and keep track of their investment. The process was time-consuming and elaborate.

However, digitisation has changed the investment landscape. Now an NRI can invest in SIP for NRI from anywhere in the world with just a few clicks. They can get real-time insight to compare and track performances and make adjustments.  Buying, managing, and selling funds has been simplified. They also get tax-saving recommendations and customised investment plans to align with their financial goals.

Top Tips for NRIs Starting SIPs in 2025

NRIs starting SIPs in 2025 should consider the following tips:

  • They should diversify their portfolio and spread the investment across various funds to balance the risks.
  • The fund choices should align with their risk tolerance and financial goals.
  • They should monitor their portfolio regularly and make adjustments depending on market trends and changing goals.
  • Awareness of Indian market trends is paramount to review performance and adjust the portfolio.

Summary

SIP for NRI is a smart investment option for NRIs, considering the growing Indian economy. It is a systematic investment plan for NRIs to derive the benefit of life cover and wealth creation over time. Digitisation has simplified the purchasing, managing, and redeeming of ULIP plans for NRIs. With diversification, review, and aligning the investment to financial goals and risk tolerance, NRIs can make the best out of this investment plan for NRI.

FAQs on SIP for NRI

Q. Can NRI invest in SIPs?

Yes. NRIs, Persons of Indian Origin (PIOs) and Overseas Citizens in India (OCIs) can invest in SIPs as long they have an NRE or NRO account in an Indian Bank.

Q. Can I continue SIP after becoming NRI?

You can continue the SIP you have started as a resident Indian when you become NRI. You will have to open an NRO account and provide the details of the account to your Asset Management Company. The maturity proceeds of the SIP will be credited to your NRO account after deducting TDS.

Q. Which SIP is best for 5 years?

The best SIP for 5 years depends on your financial goals, risk tolerance, and expected returns. You can seek professional guidance. A customised plan to align with your risk appetite and objectives will be provided.

Q. Are there any tax implications for NRIs on SIP returns?

Short-term capital gains are applicable if you redeem the SIP within 12 months. The profit will be taxed at 20%. Long-term capital gains are applicable for gains above Rs. 1.25 lakhs if the SIP is redeemed after 12 months. 12.5% tax is applied on the gains.

Q. What's the minimum amount for SIP investment for NRIs?

The minimum amount for SIP investment for NRIs is Rs. 1000/-. However, some mutual funds may stipulate higher investments.

Related Articles:

References:

1. https://www.investopedia.com/terms/s/systematicinvestmentplan.asp

2. https://cleartax.in/s/nri-investment-in-mutual-funds-in-india-process-regulations-and-more

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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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SIP for NRI: A Smart Way to Invest and Secure Your Future

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#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.

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