GST Waiver On Term Insurance For NRIs

NRIs, or Non-Resident Indians, often find themselves straddling two worlds rooted in India while exploring life's adventures abroad. Now, let's take an example: assume that an NRI, Amit, wants to make some kind of provision for a secure financial future for his family residing in India. He feels like buying term insurance to create a protective umbrella across borders. This will give him the reassurance that his loved ones are protected, no matter which way life takes him.

But you know, to keep that protective shield intact, premiums have to be paid; and like everything else, there's a bit of GST attached to insurance products too.

Now comes the silver lining - the exemption of this GST on term insurance for NRIs. This waiver makes the product more accessible and reasonably priced for NRIs like Amit, hence making the wallet woes a little less.

Let us delve deeper into the waiver of the GST for NRIs buying term insurance and what benefits and advantages it brings to the table.

Understanding GST On Term Insurance For NRIs

GST stands for Goods and Service Tax. It is an indirect tax levied on products as well as services. It makes the tax system simpler by bringing several complex indirect taxes under one umbrella. Everything is combined into a single uniform system, hence making the taxation process quite smooth. And insurance products like term life insurance also fall under financial services. So, just like with any other goods or services, you will have to pay GST for term life insurance, too. Usually, 18% GST is added to a regular term insurance premium.

Yes, this includes NRIs as well. Hence, GST inherently gets included in the deal while availing of services like term life insurance for a resident or an NRI.

You can conveniently pay your premiums using the following modes-

• Non-Resident External Bank Accounts (NRE)
• Non-Resident Ordinary Nature Accounts (NRO)
• Foreign Currency Non-Repatriable Accounts (FCNR)

However, what is more important here is to note in which currency the term insurance policy has been issued. In case it is denominated in foreign currency, the premiums must be paid in that foreign currency only from an NRE or FCNR account. If it is denominated in Indian rupees, there the premiums will have to be paid through an NRO account.

So, depending on how your policy is denominated, according to that, you can choose the account so that premium payments go smoothly.

What Is A GST Waiver For NRIs In India?

A while back, IRDAI and the Ministry of Finance joined forces to introduce a policy allowing NRIs to buy life or health insurance in India without the added cost of GST. This was a step to make insurance more accessible or pocket-friendly to NRIs, considering their special circumstances.

Now, under the Government of India's IGST Amendment Act 2018, Section 2(6), there is a provision for exemption of GST in the case of export of service if all conditions as stipulated are complied with. Under this, all renewal premiums by any NRI/ FNIO/ OCI policyholders qualify to be an export of service and could be eligible for the exemption from GST.

In simple words, any holder of NRI/ FNIO/ OCI status can claim a special exemption under GST, provided that all necessary documents are provided and certain specified criteria are met. This makes the insurance more cost-effective and beneficial to non-resident individuals.

Since 2021, there have been various benefits circulating in the industry for NRIs to avail of term insurance policies. Added to this is an attractive refund of 18% GST on plans availed in India. It substantially augments the reach and attraction of term plans to NRIs, positioning them as both cost-effective and highly desirable choices.

To be eligible for GST refunds on term insurance for NRIs, applicants must hold a Non-Resident Indian (NRI), Overseas Citizen of India (OCI), or Foreign National of Indian Origin (FNIO) status.

The insurance premium must be remitted through a Non-Resident External Account, ensuring it is sourced from external funds. Some exceptions may exist where other accounts, such as NRO or SWIFT, could also be eligible for GST concessions. Always consult a financial advisor or insurance agent who will help you with your eligibility for the scheme. Make sure that you avail all benefits from it and keep possible complications at bay down the line.

How To Get A GST Waiver For NRI Term Insurance?

1. First, Create A Non-Resident Master And Submit Documents
   Understand the list of documents needed to qualify for a GST refund. Different insurance providers may have varying document requirements. Generally, these are the usual documents to have ready when setting up a Non-Resident Master account -

• Overseas Address Proof (Any one of the following): a. Foreign/Indian NRE bank account statement mentioning overseas address b. Driving License c. Overseas country passport d. Certification from the Government/ Embassy e. Government-issued ID card f. Any Utility Bill g. Lease/Rent agreement covering period of premium payment h. A copy of the last page of the passport containing the latest Exit Stamp

• Payment Proof: Latest bank statement/copy of cancelled cheque/passbook confirming registered NRE account and reflecting premium payment from the same account.

• Foreign Tax Identification No. (FTIN): A copy of your Foreign Tax Identification No. (FTIN)

• Self-Declaration: To be provided on plain paper or from registered mail ID.

You'll need to provide hard copies of these self-attested documents at the servicing branch, either by visiting in person or sending them by post. Once your Non-Resident Master is created, it remains valid until the expiration date of your VISA. However, remember that you'll need to submit the mentioned documents again to renew your Non-Resident Master after your VISA's expiry date.

2. Payment Of Premium
   Once your Non-Resident Master is set up, you can move forward with paying your premiums. You can conveniently make premium payments online through Internet banking, making the process smooth and hassle-free. It's important to note that you should use your NRE account to make premium payments in Indian currency.

And, if you happened to overlook claiming that waiver when you bought your plan, there's still hope! Read on to know more-

How Can NRIs Claim GST Waiver After Buying Term Insurance?

A lot of people aren't aware of the GST waiver for NRIs on insurance premiums and end up purchasing term plans without the deduction. However, if you missed claiming an NRI term insurance GST waiver when buying your plan, don't worry. You can still claim a refund under the current tax laws by submitting the necessary documents.

Benefits Of Getting A GST Waiver On Term Insurance For NRIs

Policies purchased in India are more budget-friendly compared to those bought abroad. The premiums are significantly lower since they're paid in Indian rupees. On the other hand, policies purchased internationally can be expensive due to the premium being in foreign currency.

What makes buying term insurance from India even more attractive is the special 18% GST waiver. It's like an extra perk that adds to the affordability and benefits of purchasing insurance locally.

The waiver of GST is much like a golden ticket, as it brings down the overall cost of the premiums to make term insurance rather inexpensive for NRIs. At this price, more NRIs have doors open for adequate coverage, allowing them to ensure financial security for their families in their absence - sans the added burden of extra tax costs. And, most importantly this avoids the possibilities of underinsurance. This is one advantageous benefit that makes a lot of difference in securing the future of their loved ones.

Wrapping Up!

The GST waiver on term insurance for NRIs is a game-changer. It's like a golden opportunity that brings financial security within reach, making insurance more affordable and beneficial. It's like a sigh of relief for NRIs like Amit, ensuring they can protect their loved ones without incurring extra taxing costs. In essence, it's a win-win situation that not only aids in financial planning but also offers immense peace of mind.