SIP for NRI

What is SIP with Life Cover?

SIP in ULIP plans allow you to invest a small fixed amount regularly in your desired or selected ULIP (Unit Linked Insurance Plan) funds. A fixed amount will be deducted every month from your bank account and invested in your preferred ULIP fund to activate a SIP. 

By availing of the benefits of a SIP with life cover, you do not need to invest a huge lump sum in one go; instead, you investments are segmented into small amounts that are paid monthly. The Systematic Investment Plan in a ULIP also promote a financial discipline in the investor to set their money aside for regular interval payments.

Compare the SIP Plans for NRI in India

What are the Benefits of SIP?

India attracts several foreign investors because of its emerging market and potential to enhance the economy. These investors are a vital part of the Indian economy and play an essential role to contribute to its growth. 

The following are some of the benefits that NRIs can avail themselves of from investing in ULIP Plans through SIP:

• Flexibility: A SIP in ULIP funds is one of the most convenient ways for investing in ULIPs with life cover as it offers flexible payments at regular intervals and flexibility during inconsistent market trends.

• Higher Returns: Systematic Investment Plans (SIPs) with life cover can be seen as an efficient and reliable way of getting higher returns during inflation than FDs or RDs.

• Compounding Power: SIPs in ULIP will help you augment your returns over the long term.

• Easier Management: With a huge lump sum of investment, it becomes tedious for you to manage your ULIP funds and its large number of units. With SIPs in ULIP, purchasing units at regular intervals makes it effortless to track and manage the funds.

• Profits from Rupee Appreciation: If the value of the Indian rupee increases with respect to the currency of your resident country, then the chance of gaining profit becomes higher.

How Does SIP in ULIP Work?

SIPs with life cover invests a fixed amount, regularly in a ULIP fund. You can buy the fund units on a date chosen by you. You can invest a pre-determined fixed amount every month or quarter, depending on your selection.

Every time you invest in a ULIP funds through SIP, you buy a specific number of fund units according to the investment made by you. This does not require time market analysis as your investment through SIP in ULIPs will benefit you from bullish and bearish trends.

Are NRIs Eligible for Investing in SIPs with Life Cover in India?

Non-Residents of India (NRI), Persons of Indian Origin (PIO), and Overseas Citizens of India (OCI) are eligible to invest in Indian SIP plans with life cover just like the Indian residents. On top of this, no special permission is required from RBI or any other regulatory body to invest in SIPs for ULIP fund.

What are NRI SIPs for ULIP?

SIPs for ULIP are user-friendly and straightforward plans for Indian citizens to invest in. However, when it comes to an NRI, many individuals get confused with the protocols and norms of a SIP in ULIP. 

There are two options available in the market for NRIs who want to invest in Indian ULIP funds schemes through SIPs. Those options are the repatriable and non-repatriable basis.

For a repatriable basis, an NRI must own an NRE account or an FCNR account in an Indian bank.

For non-repatriable assets, an NRI must hold either an NRE account or an NRO account with an Indian banker.

How Can the NRIs Invest in a SIP with Life Cover?

There are two primary tools that an NRI requires for proceeding with any investment in India:

• Non-Resident Original Account (NRO)

• Non-Resident External Account (NRE)

NRIs can easily invest in Indian ULIP funds with the help of bank accounts, as mentioned earlier in any Indian bank. So now we need to get an inclusive insight into the process of investment through SIPs with life cover.

Online KYC

This involves a seamless process through which NRIs can effortlessly complete their KYC (Know Your Customer) requirements for ULIP Plans in India. This process involves the NRIs submitting the required documents through the online method, and the system verifies the details through IPV (In-Person Verification).

Documents Required

The following are some of the documents required to proceed with the registration process:

• Filled in and signed the KYC form.

• Passport and PAN Card (self-attested) for identity verification.

• Mandatory address proof for the verification of NRIs (both correspondence and overseas address).

In-Person Verification Process

After submitting the relevant documents, the verification of the documents is an essential step of the procedure.
Several authorized entities do the In-Person Verification to check the authenticity of the documents presented by the investors. This IPV can be done in two methods:

1. Offline Method

   This method includes document verification where NRIs are required to visit the nearest office, or some officials visit the NRIs' workplace or home for originality verification. 

2. Online Method

   This is the most prevalent method of document verification in recent digital existence. The IPV can be done on a video call with the authorized agencies and entities. The video call includes the officials asking questions about the details given in the KYC form. If the officials suspect any foul play or any details are contradicted, the application can get cancelled.

How are NRI Investors Taxed for ULIP Plans?

A common fear of paying double taxes is prevalent among the NRI investors for ULIP Plans. However, the lack of insight makes the investors fear double taxes. This is certainly not the case because if India has signed the DTAA (Double Taxation Avoidance Agreement) with the investor's country, there will be no paying taxes twice.

The following table mentions the tax rates of ULIP plans for NRIs:

• Tax-free ULIPs: If the annual premium is below ₹2.5 lakh, maturity proceeds remain tax-exempt under Section 10(10D) of the Income Tax Act.

• Taxable ULIPs: Policies with annual premiums above ₹2.5 lakh face capital gains tax.

• Short-term capital gains (STCG): Taxed at 20% if the policy term is under three years.

• Long-term capital gains (LTCG): Taxed at 12.5% for profits above ₹1.25 lakh.

• Eligibility for Deductions: Premiums paid for ULIPs can be claimed under Section 80C (up to ₹1.5 lakh per year).

Important Points for NRI Investors

There are some aspects of investing in ULIP funds in India that NRIs must keep in mind. These points can be seen as limitations or protocols of ULIP Plan investments. The following are the points that every NRI should consider before investing in a ULIP fund in India:

• Eligibility: NRIs and Persons of Indian Origin (PIOs) can invest in ULIPs.

• Currency Options: Premiums can be paid in INR or foreign currency, depending on the insurer's rules.

• Documentation: Requires KYC documents, income proof, and NRI/PIO status verification.

• Payment Methods: Premiums can be paid through NRE/NRO accounts, wire transfers, or international credit cards.

• Tax Benefits: ULIP investments may qualify for tax deductions under Section 80C and Section 10(10D) of the Income Tax Act.

• Maturity Benefits: Proceeds are typically tax-free in India if the annual premium paid are below ₹2.5 lakhs, but home-country taxation may apply.

• Fund Options: Offers both equity and debt funds with switching flexibility between them.

• Repatriation: Maturity proceeds can be repatriated, subject to RBI and FEMA guidelines.

Wrapping it Up

SIP in ULIP plans offers NRIs a smart way to grow wealth systematically while enjoying life insurance coverage. It combines the benefits of regular investing, market-linked returns, and tax efficiency. With flexibility in fund choices and the power of compounding, it’s an effective tool for long-term financial goals.