Can NRI's buy Insurance policies in India?
Life insurance policies can be obtained by NRI’s from several insurance companies operating in India. The range of products offered by these companies cover almost every requirement, promising security as well as returns.

What are the procedures to get insurance from an Indian Insurance Company?
The procedure for purchase of an insurance policy involves filling up the proposal form and the moral hazard report, undergoing a medical examination and paying the initial premium. These formalities can be completed by NRI’s during their visit to India or from their country of residence through mail order. Most forms can be downloaded from the website of insurance companies.

If the policy is being proposed from overseas, an endorsement by the local Indian embassy is required after verification of the applicant’s passport, though in the case of students, the Dean or Principal’s signature would suffice. The applicant needs to have a copy of the first page of his passport also certified by the official attesting his policy. These documents have to be submitted to the insurance firm.

Why should I get myself insured in India and Indian Rupee?
The insurance market at India is the highest growing financial services and the total premium income is about 24% of the GDP growth. This is also increasing. The FDI norm in the Insurance sector is poised to be 49% instead of 26% at present. Who knows, it may be 100% in the coming days when the growth of premium will shoot up to that level!

There are always 2 sides to a coin and 2 or more answers to a question. Here is the one side.
Firstly, the US economy is weak.
->  Growth is slowing down (annual growth rate of around 1.3%)
->  Interest rates are very low (1%)
->  Unemployment is rising and more layoff expected
->  Current account deficit is still a high % of GDP
->  Concerns over Financial system and bank failures
As per theoretical analysis, America has all the ingredients of a weak currency. The main reason for the dollar's appreciation is the realisation that maybe the dollar has been oversold in its long bear market since 2001.

Currency Exchange Risk is surely accompanied with a foreign currency policy. At the time of the claim or in an unfortunate event if your family faces a currency exchange risk then the motif behind taking an insurance policy goes in vain. The debacle in the currency can completely ruin the financial planning and also your dreams to leave behind wealth for your family.

What are the investment choices for NRI’s?
NRI’s can have bank deposits on which they can earn Indian rupee interest (NRO deposit, not repatriable 30% TDS) or Libor linked interest (NRE, FCNR deposits, fully repatriable, interest fully exempt from tax). Bank deposits are still the most popular form of investment for NRI’s.

If the objective is to earn the higher interest rates (Interest rates in Indian markets are higher than the international rates that are Libor-linked) they are primarily interested in debt-oriented products.

Debt products
->  Government sponsored saving schemes like Post office NSC – Not eligible to invest
->  RBI Savings Bonds – Not eligible to invest
->  Government Security – Eligible. Have to open SGL II account. Interest taxable. TDS applies
->  Bank deposit – Eligible. Have to obtain PAN number. TDS applies on taxable NRO deposits
->  Corporate Bonds – Eligible. Low liquidity. Interest taxable. TDS applies
->  Debt Mutual Funds – Eligible. High liquidity. Dividend (subject to DDT) exempt from tax. Capital gains subject to indexation (TDS applies)

Equity products
NRI’s are eligible to invest directly in equity markets or through mutual funds. The tax implications are the same, except for short term capital gains. Dividend is exempt from tax, long term capital gains are exempt. Short-term capital gains are taxable at 15%+sc+cess, effective 16.995% for direct investment and equity funds, but in the case of equity funds, the short term capital gain is subject to TDS at 33.99%, even though the applicable tax is much lower at 11.33%

Why mutual funds?
->  Range of products – from Liquid fund, to FMP, MIP and equity and FMP, mutual funds has them all. They can choose the product they are most comfortable with
->  Tax exempt income – Mutual fund dividends are fully exempt from tax. No TDS
->  Benefit of Indexation – They can choose a growth option in a debt fund, so that their long term capital gains can be indexed. The actual long term capital gain is thus drastically reduced
->  Procedural Ease – NRI’s worry the most about the procedures for PAN and returns, and the hassle of getting the income tax refund. They will love a mutual fund product that gives them the return, which is tax exempt
->  Facility to re-invest dividend - In a mutual fund product, they can choose a dividend re-investment option that enables them to deal with payouts easily, without having to worry about small amounts getting credited into bank accounts

Which mutual fund products would appeal to the NRI’s who are currently investing in fixed deposits?
->  Since the NRI’s are comfortable with fixed income products, the FMP would appeal to them. The points to note are as under:
->  It is important to check if there is a rollover option, so the investor knows
->  Every FMP does not have both growth and dividend options. If only one option is available, tax implication is to be explained. If it is long-term capital gain (growth option, FMP>1yr), 10% LTCG tax (effective 11.33%) will apply as TDS, after indexation benefit. If it is a short term capital gain, 33.99% tax and TDS will apply. If it is a dividend option, the DDT will apply (14.1625% effective)
->  If a NRI chooses to invest in debt mutual funds, a growth option is better than dividend option if the holding period is over 1 year. Only 10% LTCG (effective 11.33%) will apply. A dividend distribution will be subject to 14.1625% effective DDT. If the holding period is less than 1 year, dividend option is better than growth option, because STCG is taxed at higher rates than the DDT

If the NRI chooses equity funds, the benefit is highest for long term holding. The dividends are tax exempt. So are LTCG. No TDS on long term capital gain
->  The short term holding in equity funds, is most unattractive. Though STCG is taxable at 16.995% effective, applicable TDS is 33.99%. If the NRI chooses a dividend reinvestment option, he can effectively earn tax-free returns from the equity investment

How can NRI's protect their investment from currency fluctuations?
It is possible to buy a forward cover against the mutual fund investments, from a bank. A lien will be marked on the investments, and a cover for exchange risk can be purchased.

Can the money be repatriated?
As long as the investment is from a NRE account, and the banker certificate is attached to the application, the funds are fully repatriable. Only investments from NRO accounts are non-repatriable.
Summary Table of Tax Implications of NRI Investment in Mutual Funds

Surcharge for Resident Indians, Domestic companies and NRIs:
For Individuals, HUF, BOI and AOP, 10% surcharge on tax payable if income exceeds Rs. 10 lakhs For others including corporate bodies, 10% surcharge on tax payable

Education Cess
Education Cess is levied at the rate of 3% calculated on tax payable plus surcharge

A higher TDS is done on equity funds, despite the actual tax rate being low, due to the relevant tax law on TDS not having altered, even in this budget (2008-09). NRI’s have to claim a refund on this TDS when they file their tax return.

NRI's CORNER - WEALTH TAX for NRI's
The most common fallacy amongst NRI's is that they are exempt from almost all taxes in India and particularly not liable for wealth tax as regards their taxable wealth/assets in India.

NRI's are to pay Wealth Tax on chargeable assets in India i.e. immovable properties, jewellery and vehicles. The subject is discussed at length under the following chapters:
Taxable Assets in India.
Wealth Tax Exemptions.
Wealth Tax Rates.

Taxable Assets for residents as also NRI's are:
[Sec.2 (ea) of Wealth Tax Act, 1957] 1
->  Buildings or land apparent there to other than, one house property or plot of Land and one additional plot of Land having area of 500 square meters or less. [Sec.5 (1) (vi) of Wealth Tax Act, 1957] 2
->  Value of personal vehicles i.e. motor cars, boats, air crafts,
->  Jewellery, i.e. ornaments made of gold, silver, platinum, or any other precious metal and bullion including utensils and furniture made of gold, silver precious metal.
->  Cash on hand in excess of Rs. 50,000/-.
->  Urban land
->  that is land situated
->  Within the Jurisdiction of Municipality and having population of 10,000 and more or
->  In any area within such distance from the local limits of municipality.

However this does not include:
->  A house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than five lakh rupees;
->  Any house for residential or commercial purposes which forms part of stock-in-trade;
->  Any house which the assessee may occupy for the purposes of any business or profession carried on by him;
->  Any residential property that has been let-out for a minimum period of three hundred days in the previous year;
->  Any property in the nature of commercial establishments or complexes;
->  Motor cars used by the assessee in the business of running them on hire or as stock in trade.
->  Yachts, boats and aircrafts used by the assessee for commercial purpose.

Urban Land will not be chargeable to tax. If.....
->  Construction of building is not permissible
->  Construction of building is made with approval of appropriate authority.
->  Unused land held for industrial purpose for two years.
->  Stock in trade for period of 10 years from the date of its acqusition by him.

IMPORTANT - IMPORT OF GOLD & SILVER:
NRI’s being granted concessional import duty and permission to import gold & silver often import large quantity of gold / silver. If the market value of such gold / silver exceeds Rs.15 lakhs & the same is held in India as at 31st March, the NRI is liable to pay wealth tax @ 1% on such value together with value of other taxable assets, in excess of Rs.15lakhs & file wealth tax return.