Health Insurance Options for NRIs – A Complete Guide

Introduction

With the Indian diaspora spread across the globe, Non-Resident Indians (NRIs) often face a dilemma regarding health insurance. While they may already be covered under comprehensive health insurance plans in their resident countries, the question remains: should they purchase an additional health insurance policy in India?

This is particularly relevant because, in most countries, NRIs already have mandatory insurance through their jobs. However, their families may still reside in India. Moreover, there is always the possibility that the NRI may eventually wish to return and settle in India, in which case their existing health insurance might not be suitable.

Even if an NRI decides to purchase health insurance in India, several factors—such as coverage gaps, financial planning, and tax benefits—must be considered.

In this article, we explore the available health insurance options for NRIs, compare their benefits and limitations, and discuss the potential tax advantages across different countries, including the USA, UK, GCC nations, Australia, Canada, and the EU.

Why Should NRIs Consider Health Insurance in India?

1. Coverage if They Return to India

Many NRIs remain uncertain about their long-term settlement plans. Some countries in the GCC, where many NRIs work, do not offer citizenship. In recent years, even Western nations have introduced stricter immigration policies, making paths to citizenship or long-term residency more challenging.

Additionally, India’s rapidly growing economy presents competitive opportunities comparable to those abroad, making settling down in India an increasingly attractive prospect. In such cases, having a health insurance policy in India ensures seamless coverage upon returning.

2. Affordability Compared to Overseas Insurance

Healthcare costs in countries like the USA, UK, and Australia are significantly higher than in India. Health insurance premiums in India are relatively more affordable, offering a cost-effective alternative or supplementary coverage—especially for planned surgeries and procedures.

3. Healthcare Challenges During Visits to India

NRIs often visit India for personal or professional reasons. However, their health insurance from abroad may not provide coverage for medical emergencies in India, leading to significant out-of-pocket expenses. Indian health insurance policies ensure protection during these visits.

4. Investment and Tax Benefits

Many NRIs maintain investments and income in India. Under Section 80D of the Income Tax Act, NRIs can claim deductions of up to ₹25,000 for self, spouse, and children. Additionally, if their parents are senior citizens, they can claim an extra ₹50,000.

5. Customised Coverage Options

Indian insurers offer a wide range of plans, including family floaters, critical illness riders, and pre-existing condition coverage after a specified waiting period. These features may not be available or might be significantly more expensive abroad.

Disadvantages of Indian Health Insurance for NRIs

• Claim Processing Complexity: While claims in India can be streamlined, handling them from abroad may be challenging.
• Currency and Exchange Rate Risks: Premium payments and insured sums in INR may fluctuate based on exchange rates in the NRI’s resident country.
• No Coverage in Their Current Country of Residence: Indian health insurance typically does not cover medical expenses incurred outside India.

Tax Implications of Health Insurance for NRIs – Country-wise Analysis

USA

Health insurance purchased in India is not tax-deductible. However, if premiums are paid from an Indian bank account, they can be claimed under Section 80D in India. Any reimbursement from Indian insurers may be considered taxable income in the US.

UK

Health insurance bought abroad (including India) does not qualify for tax relief. However, any reimbursements from Indian health insurance may be taxed as foreign income under UK law.

GCC (UAE, Saudi Arabia, Qatar)

GCC countries do not have personal income tax, meaning there are no tax deductions for premiums. However, insurance claims from Indian policies are not taxable due to the absence of income tax.

Australia

Premiums paid to Indian insurers do not qualify for Medicare levy exemptions or tax offsets. Reimbursements from Indian insurers are considered foreign income and may be taxable.

Canada

Health insurance purchased abroad does not qualify for tax credits. Reimbursements from Indian insurers may be taxable income.

European Union (Germany, France, Netherlands)

Health insurance bought from India does not qualify for local tax benefits. Reimbursements are generally taxable, subject to the specific country’s tax regulations.

As a general rule, to avoid taxation on reimbursements, NRIs should ensure that payout bank details belong to a resident family member in India, instead of their own account.

Tax Treatment of Health Insurance Reimbursements in India

Under Indian tax laws, medical reimbursements through health insurance are non-taxable, provided the insured has paid the premiums. However, NRIs must declare such reimbursements as income in their country of residence if local tax laws require them to do so.

Practical Tips for NRIs Considering Health Insurance in India

• Consult a Tax Expert: Understand cross-border tax implications before purchasing a policy.
• Check Coverage Exclusions: Ensure the policy covers pre-existing conditions and is not restricted to accidents or emergency care.
• Keep Documentation Handy: Maintain receipts, policy documents, and payment proof for tax filings in India and abroad.
• Plan for Currency Fluctuations: Use NRO accounts for premium payments to mitigate currency risks.

Final Thoughts

Purchasing health insurance in India can be a wise decision for NRIs, particularly those who visit frequently or have dependents in India. However, it is crucial to evaluate coverage, costs, and tax implications based on the country of residence.

A well-thought-out strategy can help ensure adequate health protection while avoiding financial or tax-related surprises.