Don’t you have friends and relatives and even close family members residing in different countries abroad. Don’t you long to meet them when they come to India for a short vacation ?. But why do our close relatives and family members go abroad?. Isn’t it to tap or make use of the better growth opportunities prevalent in these countries? .How nice it would be for a non resident Indian if he could get the best of both Worlds’. He could earn abroad and then make use of the vast and high quality financial instruments available in India for his growth and investment opportunities .We have heard the famous saying “Don’t Search For Your Raincoat Once It Begins To Rain”.I would like to remind all of you that the team of financial planners at IndianMoney.com are always there for you to plan your financial needs in an efficient manner. You can explore this unique Free Advisory Service just by giving a missed call at 02261816111.
So Who Is A Non Resident Indian?
A person is considered to be a resident of India for Income Tax purposes based on the actual number of days he resides in India .A person would be considered a resident Of India for income tax purposes if he is in India for more than 182 days during the fiscal year from April 1st to March 31st.But does this mean that if I am in India for less than 182 days I am an NRI?.It does hold true in most cases. If you are in India for 60 days or more in a fiscal year and 365 days or more in the earlier four fiscals you are regarded as a Tax resident Of India even though you might have stayed in India for less than 182 days in the previous fiscal year.
However relaxations exist for this law. Let us consider an Indian citizen leaves India in order to work abroad or he serves as the crew of an Indian ship, then instead of 60 days the relevant time period is raised to 182 days. A person either of whose parents or grandparents was born in undivided India is a PIO (Person of Indian Origin)..The person avails this benefit if he resides outside India and comes to India on a visit. Now the period of 60 days is replaced by 182 days or more. The NRI’s who come on a visit to their hometown and stay for 2 months do not have to worry that their world wide income will be taxed in India.
How Does An NRI Purchase Insurance In India:
One of the most important plan an NRI needs to take is the term insurance plan .Many people in the hurry and euphoria of leaving the country forget that all important term plan. But what Is This Term Plan And Why Is It Important? This is mainly a life insurance policy which provides coverage at a fixed rate of payments called the premium for a fixed duration or a time limit..This is the least expensive way to provide for substantial death benefits at a young age. The most common terms are ten, fifteen, twenty and thirty years. This plan is relatively cheap and provides substantially large benefits. It is highly recommended that before you move abroad you take that term policy as not only will this save you a lot of hassle the premiums you pay will be much lower.
Let us consider Mr Ashok is an NRI Engineer working in Germany. His housewife spouse and 3 children reside in India.He also has his parents dependent on him. Mr Ashok wants to purchase a series of insurance products in order to protect his family .What are the insurance products he should opt for?
Mr Ashok opts for a term life insurance policy. A number of such term policies are available including a number of online policies .Online policies present a lot of hassles if not taken before a person becomes an NRI. Mr Ashok smartly took up this online policy before he left the country .Mr Ashok also maintains an account in India where he has given the power of attorney of this account to his wife to manage the bank account. This is a legal way to bestow power to someone to act on your behalf .He has opted for a level term insurance policy. Another feature of term life insurance is Level Term Life Insurance. In this form the premium paid remains constant for the duration of the contract. Here the age factor and time value of money is factored into the premium payments. Most of these policies have a renewable option which allows the insurer to renew the policy for a maximum guaranteed rate, if the insured period has to be raised or extended.
Mr Ashok has taken a children’s education plan for his children. Ashok always envisions the future. In case something were to happen to him his children’s educational plans should not be in jeopardy. The cost of education is increasing year after year and is in Lakhs of Rupees. Tuition fees are ridiculously high. What if something happened to Mr Ashok? Who would fund his children’s education plan?.Mr Ashok has opted for a child insurance plan. It helps to build the required corpus as well as protects against the uncertainties of life. This comes along with a family income benefit rider. A family income benefit rider is usually attached to a basic life insurance policy. If one opts for this policy the life insurance company not only pays the death benefit in case of the death of the policyholder but also if there is a 10 year income rider attached the insurance company will pay the family monthly income for the remaining rider term .Say Mr Ashok were to pass away in an unfortunate accident after taking the policy his family would get a death benefits as well as monthly income for the remaining years of the policy under the family income benefit rider.
Mr Ashok has taken an immediate annuity plan for his parents. Here payments are made immediately or within a year of the policy’s issue.Ashok pays off the premium and regular payments on a monthly basis are made to his parents.Ashok will then get the investment amount back on the death of his parents which he can then repatriate to his country of residence. Ashok has smartly opened an NRE Savings accounts and can transfer funds online using Net Electronic Fund Transfer popularly called NEFT. This is used to pay all his premiums on any insurance policy he has taken in India.
How Can An NRI Purchase A Life Insurance Policy In India:
An NRI can purchase Life Insurance under the medical and non medical scheme depending on their health condition, the sum assured they are opting for and also which country they are working in. He has to satisfy the following conditions in order to be eligible for the non medical scheme. We need to know what a mail order business is which is basically NRI’s can obtain insurance cover in their present country of residence .All formalities are completed there itself. The agent of the Indian Insurance Company will travel to the policy holder’s country and complete all the required formalities subject to certain conditions:
· He should not have attained an age more than the prescribed limit of 45 years.
· The life insurance covers of high risk and term plan rider benefits are not provided to him.
· He should be working as a Doctor, Engineer, Chartered Accountant, Teacher Lawyer and similar professions.. He should be working in a reputed commercial firm or in Government service.
· This is mainly applicable if the insurance policy is obtained during a visit to India or through mail order business where the agent will visit the country of residence of the NRI.
· These policies are not applicable if the NRI resides in certain countries such as Pakistan and Bangladesh
· The person who takes this policy has to undergo medical tests like blood test, heart test, Electro Cardio Gram blood sugar test, general physical, Cholesterol and so on.
Documents Required To Purchase A Life Insurance Policy:
· Medical report (Not Applicable For Non Medical Scheme)
· Special medical report if any
· Attested copy of the passport
· Proof of age and income.
· Initial deposit equivalent to installment premium under the proposed plan of insurance.
· Special Questionaire mainly if the proposal is under mail order business and if the agent does not visit the country of residence of the proposer or the person who takes the policy.
Things To Take Care Of While Buying That Life Insurance:
· Minimum sum assured would be 2 Lakhs and maximum sum assured would depend on conditions of insurability. Under mail order business maximum sum assured would be 1 Crore..
· Critical Illness Benefit Is Not Granted.
· Term Rider Benefit would be restricted based on sum assured,
· Policies are issued in Indian Rupees Only.
· Sum assured would be restricted in the case of term life insurance.
· The premium’s are same for residents and non residents .However if NRI’s are living in countries where risk is higher premiums are higher.
· If the NRI conducts medical tests in a foreign country then the maximum limit he can insure himself is a Crore. If he conducts his medical test in India then he can insure himself for a higher sum.
I would like to end this article stating the famous quote “The Ladders Of Success Are Best Scaled By Stepping On The Rings Of Opportunity”. NRI should make use of these opportunities as soon as possible. Life can be cruel and when one is stuck in life’s pits there is none to help you. So do not postpone that insurance purchase.”Do It Right Now”.
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