Tax Benefits for NRI Life Insurance
The Foreign Exchange Management Act (FEMA) has introduced several benefits of life insurance policies to meet the needs of insurers. The government has also implemented tax benefits for life insurance to let NRIs secure their families' well-being.
Here is a detailed overview of tax deductions and exemptions for NRIs under Indian taxation laws:
Under Section 80C, premiums that insurers pay for life insurance policies are eligible for tax deductions from total gross income. Thus, NRIs can avail of total tax deductions for the premiums paid annually. The maximum limit of tax deduction under Section 80C is Rs. 1,50,000.
Following the below conditions, you can save taxes under Section 10(10D) applicable for life insurance policies maturity proceeds :
a) The annual rate of premium must not exceed 10% of the total sum assured. This is applicable for policies purchased on or after April 1, 2012 ,
b) The premium should not be more than 20% of the sum assured for policies purchased between 1 April 2003 to 31 March 2012 ,
c)where life insurance policies are purchased for persons suffering with severe disability or disease , the premium amount should not be more than 15% of the sum assured, and the policy should have been issued on or after 1st April 2013 ,then it will qualify for tax benefits
d)The premium for ULIP policies should not be exceeding Rs 2,50,000 for policies issued on or after 1st February 2021 while for policies other than ULIP Rs 5,00,000 for policies issued on or after 1st April 2023.
NRIs can avail tax deductions under Section 80D, who have chosen to include health riders in their life insurance policies. Following the below conditions, a NRI can determine the tax deductions:
a) Deductions up to Rs. 25,000 are applicable for spouses, and children whereas an additional Rs. 25,000 deduction is applicable for parents
b) If parents are categorised as senior citizens, the maximum deduction that can take place is Rs. 50,000
c) Being a senior citizen themselves , they can claim for deductions up to Rs. 50,000
Under Section 10(10D), an NRI can avail tax exemption on benefits of maturity, death payouts and bonuses for policies chosen. The following are the conditions which will cause tax exemption benefits:
a) For policies purchased on or before March 31, 2012, the annual premium should not be more than 20% of the sum assured whereas, for policies issued on or after April 1, 2012, the premium should be 10%
b) Death benefits are completely exempt.
c) The premium for ULIP policies should not be exceeding Rs 2,50,000 for policies issued on or after 1st February 2021 while for policies other than ULIP Rs 5,00,000 for policies issued on or after 1st April 2023.
d) If the policy payment is done as a part of the Keyman Insurance Policy, there will be no exemption