Here's how NRIs can save up to 18% GST on insurance premiums

Mint

01-05-2025

Insurance attracts Goods and Services Tax (GST), which increases its price by up to 18%. However, non-resident Indians (NRIs) can save on GST in their insurance premiums.
Take the case of Ankit Jain, a 40-year-old NRI who works as a consultant in Germany. He paid
₹
86,641 for his policy but will receive a
₹
15,595 GST refund, thanks to sub-clause (iv) of Section 2(6) of the Integrated Goods and Services Tax (IGST) Act. It states that when an NRI buys an insurance policy via a foreign address, it is considered an export of a service and thus exempt from GST, said Ashish Karundiya of Ashish Karundia & Co.
In this article, we explain how NRIs can claim a GST refund on their insurance premiums.
When an NRI buys an insurance policy, they can specify that they are buying it from abroad by submitting a declaration form, provided by the insurance company. Keep in mind that the payment should be made from a non-resident external (NRE) or foreign currency account. If the payment is made through a non-resident ordinary (NRO) account, the buyer won't be eligible for a GST refund.
If the policyholder has already paid premiums for the insurance, including the GST, they can apply for a refund. If the insurer has already deposited the GST with the government, the NRI won't be able to claim a refund. This is because GST is collected directly from the company and individuals cannot apply for a refund on their own.
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'If the NRI gave GST to the insurers unknowingly, they can apply for a refund. If they apply within a month, the insurers won't have deposited the GST with the tax authorities and will issue a refund. However, once the company deposits GST with the authorities, it's difficult to get it back," said a person who works with a life insurance company and wished to remain anonymous.
He added, 'Some insurers still refund the amount to NRIs from their cash flow, even if they've deposited GST with tax authorities, to remain competitive. But those should be seen as rare cases and not the norm."
Sonam Arora, business head - health insurance for NRIs at PolicyBazaar, said most life insurance providers allow policyholders to submit the necessary documents upfront to avoid paying GST.
In contrast, most health insurance companies typically charge GST at the time of payment and issue a refund once the required documents are submitted. These refunds are usually processed within two weeks, provided the documentation is complete. However, health insurance companies are now working towards offering an upfront GST waiver, with the rollout expected in the next month or two.
The GST rate for term insurance, health insurance, and riders is 18%. For endowment plans, it is 4.50% for the first-year premium and 2.5% for subsequent ones. If it is a single annuity plan, GST is 1.20% of the total premium.
Note the GST waiver does not apply to unit-linked insurance plans (ULIPs).
The insurance company needs to show the GST authorities that the payment came from an NRI living abroad and was made through an NRE or foreign currency account.
Document requirements can vary across insurers. According to Arora, for NRIs to claim GST exemptions or refunds, the following documents are generally needed:
• Entry and exit stamps in the passport/visa
• NRE bank account passbook
• Proof of international address or tax residency certificate (TRC)
Arora from Policybazaar said insurance companies typically request documentation at every policy renewal to confirm that the policyholder continues to hold NRI status and that the renewal premium is being paid through an NRE account. This helps ensure compliance with regulations for GST exemption.
Experts told
Mint
that except in the case of LIC, NRIs can apply for a GST waiver or refund online.
Alpin Kanabar, an NRI accountant based in Doha, Qatar, contributes
₹
5 lakh every year to LIC's New Jeevan Labh Plan. At first, he didn't know NRIs were eligible for a GST waiver, but when he found out he could save 2.25% GST on premiums from the 2nd year onwards, he approached his agent. After all, it meant saving
₹
12,472 every year.
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However, he found out that LIC did not have an NRI option when he tried to pay the premium online. He found out he had to go to the counter/branch and submit the documents offline to get the GST waiver. He finally got the GST waiver after he couriered the cheque for the premium from his NRE account to his agent, who deposited it and got the waiver for him.
For other companies, the process is completely online.
In addition to availing of GST benefits on their own insurance policies, NRIs can also act as proposers and buy life and health insurance for their family members—including spouses, children, parents, siblings and in-laws. In such cases, they may also receive a GST waiver or refund.
It is important to note that these insurance policies for NRIs only cover medical expenses incurred within India, and not overseas. However, when the policy is purchased for family members living in India, there are options for global coverage plans.
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