As a Non-Resident Indian (NRI), getting a term insurance plan is a wise decision to secure your family's financial future back in India. However, buying a term plan in India comes with an additional cost i.e. Goods and Services Tax (GST) at 18%. Currently, the Indian Government offers NRIs a special GST waiver of up to 18% on premiums of term insurance plans purchased from an Indian Insurer.
Let’s understand how you can get a GST waiver for NRI on insurance premiums and save money with annual premium payments.
#All savings and online discounts are provided by insurers as per IRDAI approved insurance plans | Standard Terms and Conditions Apply
The Goods and Services Tax (GST) is a type of indirect tax that has replaced a number of indirect taxes that existed in India like VAT, excise duty, service tax, etc. It is called a destination-based tax, which simply means it is levied when you purchase a product or service. The current GST on term insurance plans in India is 18%.
As an NRI, if you buy a term plan in India, you will be required to pay GST on term insurance premium amount. The GST amount is added to the premium, and the total amount is paid by the policyholder.
Term Plans
According to the new changes in the Reserve Bank of India’s guidelines regarding Foreign Exchange Management, the premium amount paid using an NRE account will be eligible to claim GST Waiver. This means when an Indian expat or an NRI buys a term insurance plan from an Indian Life Insurance company, he/she becomes eligible to avail of a waiver of GST on term insurance premiums paid to keep the policy active, resulting in a saving of 18% on their premiums.
NRIs can get a GST waiver on term insurance plans. Here’s how:
In order to get a GST waiver on term plans, NRIs should buy the plan through a non-residential external (NRE) bank account. The premium amount must be paid in Indian currency, and the plan must be issued to NRIs' foreign addresses. This way, the plan will be treated as an export of products and will be exempted from GST on term insurance.
NRIs are required to submit certain documents:
NRE Bank Statement and
Address Proof
These documents are necessary to verify the status and eligibility to avail GST waiver for NRI on insurance premiums.
*Note: You can easily know what is term insurance and then understand the GST waiver for NRIs who wish to buy term life insurance plan.
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Many people are unaware of the GST waiver for NRI on insurance premiums and buy term plans without GST deductions. However, people who were unable to claim an NRI term insurance GST waiver for NRI on insurance premiums before buying the plan can claim a refund as per the prevailing tax laws by submitting the required documents.
Getting a GST waiver on term insurance can provide several benefits for NRIs. Here are some of them:
By getting a GST waiver on term insurance, NRIs can significantly reduce the premium amount. The 18% GST on term insurance can add a considerable amount to the premium, which can be saved by getting a GST waiver.
With a reduced premium amount, NRIs can plan their finances better. They can allocate the saved amount towards other savings or investments, which can provide better returns in the long run.
By saving on the premium amount, NRIs can opt for a higher coverage amount on their term insurance plan. This can provide better financial protection for their family in case of an unfortunate event.
NRI customers often find the process of paying premiums daunting as they have to submit their bank statements and address proof every time they pay their premiums on a monthly basis. This is why experts suggest NRIs pay their premiums in an annual mode to decrease their premium payment stress.
*Note: To quickly know the premium of your term insurance plan, you can use the term insurance calculator.
Let us take a look at the benefits of buying a term insurance plan for NRIs on an annually payable premium payment mode.
Hassle-free Premium Payment Process: Annual premium payment modes allow the customer to pay their premiums in a hassle-free manner. Though, the same benefit is applicable on monthly mode also, if in case the customer sets up an auto-debit on it. But the worry of making the premium payment every month goes away when one is paying on an annual basis.
GST Waiver: As discussed above, term plans give NRI customers a chance to claim up to 18% of GST waiver for NRIs on insurance premiums paid using a non-residential bank in freely convertible currency.
Submitting GST Waiver Documents: To pay the premiums online, the NRI needs to submit the GST waiver documents like an NRE bank statement showing deduction and international address proof, every time he/she tries to make a premium payment. In annual mode, the NRI has to undergo the hassle of attaching documents only once every year rather than regularly on a monthly or quarterly basis.
Get Extra Discounts in Annual Mode: An NRI customer can claim an extra discount of 5% on the premiums paid in an annual mode instead of any other mode. This, along with the waiver of GST on term insurance, provides the NRI customers with a total savings of 23% on the overall premiums paid.
Less chance of Policy Lapsation: Paying the premiums in an annual mode reduces the chances of policy lapsation as the hassle of remembering and paying the premiums within the due date is removed.
Term insurance is a financial product that offers both long-term security and tax-saving benefits at an affordable premium rate. For NRIs especially, it is an important tool to protect their loved ones back home in India, while they live in their new country of residence. NRIs can not only avail of the above-mentioned benefits but also get an 18% GST waiver along with a 5% additional discount on the annual premium payment mode for their term insurance plans.
Note: Check out the best term insurance plan in India and choose one that suits your requirements.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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