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The PPLI glossary for Indian families and NRIs
Thirty-four terms, in the order a family meets them: who you are for Indian law, what exchange control allows, how income tax treats the policy, what has to be disclosed, what the policy itself is made of, and how the money passes on. Each entry says what the term means and why it matters, with the page where it is worked through. Indian statutory terms keep their statutory names; market terms are marked as such.
Indian law as at 20 October 2026. Section numbers follow the Income-tax Act 1961; the Income-tax Act 2025 applies from 1 April 2026 and renumbers them.
PPLI.com is a research publisher. It is not an insurer, an insurance intermediary or a tax adviser, it is not registered with IRDAI or SEBI, and it does not solicit or arrange insurance in India. Definitions are for orientation, not advice.
Who you are for Indian law
- NRI (Non-Resident Indian)
- An Indian citizen or person of Indian origin who is not resident in India under section 6 of the Income-tax Act, or under FEMA, which uses a different test. The two can diverge in the same year.Why it matters: an NRI’s foreign income is outside Indian tax and outside FEMA, which is why a foreign policy is built while non-resident. Returning to India: the RNOR window
- OCI and PIO
- Overseas Citizen of India, a status under the Citizenship Act for foreign nationals of Indian origin; Person of Indian Origin, the older category now merged into OCI for most purposes. Both are treated as persons of Indian origin for the 120-day residence rule.Why it matters: an OCI with Indian income above ₹15 lakh becomes resident at 120 days in India, not 182.
- RNOR (Resident but Not Ordinarily Resident)
- A resident who was non-resident in nine of the ten previous years, or in India for 729 days or fewer in the previous seven (section 6(6)). Usually two to three years after a return.Why it matters: foreign income earned and received abroad is outside Indian tax, and Schedule FA is not required. The RNOR window
- ROR (Resident and Ordinarily Resident)
- A resident who does not qualify as RNOR. Taxed on worldwide income and required to report foreign assets.Why it matters: from the first ROR year the foreign policy goes in Schedule FA and tax reaches every withdrawal.
- Deemed resident (section 6(1A))
- An Indian citizen with Indian income above ₹15 lakh who is not liable to tax in any other country by reason of domicile or residence is deemed resident in India, and is RNOR.Why it matters: an NRI in a country with no personal income tax, such as the UAE, can be caught.
- FEMA
- The Foreign Exchange Management Act 1999 and the regulations under it, administered by the RBI. For insurance, the Foreign Exchange Management (Insurance) Regulations, 2015, notified as FEMA 12(R)/2015-RB.Why it matters: regulation 4 requires RBI permission for a resident to take a foreign life policy; regulation 4(ii) lets a returning NRI keep one. FEMA, LRS and foreign insurance
- LRS (Liberalised Remittance Scheme)
- The RBI scheme under which a resident individual may remit up to USD 2,50,000 a financial year for listed purposes.Why it matters: life insurance premium is not a listed purpose, and the limit is far below PPLI scale.
- TCS (tax collected at source) on LRS
- Under section 206C(1G), the bank collects tax on LRS remittances above ₹10 lakh a year: 20% for purposes other than education and medical treatment, as reported for 2026-27.Why it matters: on the full LRS limit about ₹46 lakh is held back and credited in the return; a cash-flow cost, not a tax.
- RFC, NRE and NRO accounts
- Resident Foreign Currency account: a returning Indian’s foreign currency account. NRE: a non-resident’s repatriable rupee account funded from abroad. NRO: a non-resident’s account for Indian income.Why it matters: the RBI’s general permission for foreign-currency policies is tied to RFC funding, and an NRI beneficiary receives proceeds into an NRE account.
- Compounding (FEMA)
- The RBI’s procedure under section 15 of FEMA for settling a contravention by payment, on voluntary application. Penalties under section 13 can reach three times the sum involved.Why it matters: a foreign policy taken without permission is a contravention, and compounding is the route to regularise it.
- Section 10(10D)
- The exemption for sums received under a life insurance policy, subject to the premium-to-sum-assured ratio and, since 2021 and 2023, to premium ceilings: ₹2.5 lakh for ULIPs and ₹5 lakh for other policies. The eighth proviso keeps death benefits and IFSC policies outside the ceilings.Why it matters: at PPLI scale the exemption is lost on surrender and kept on death. Section 10(10D) for high-premium policies
- Section 56(2)(xiii)
- The charge on a sum received under a non-exempt life policy, less premiums paid, as income from other sources at slab rate, computed under Rule 11UACA.Why it matters: it is the rate a surrender in life pays, about 39% at the top, not the 12.5% long-term rate.
- Section 45(1B) and Rule 8AD
- The charge on a non-exempt ULIP as a capital gain, computed as the amount received less premiums; an equity-oriented ULIP is taxed as an equity-oriented fund.Why it matters: whether an offshore unit-linked policy is a ULIP for this section is unsettled, and the rate difference is large.
- Slab rate, surcharge and cess
- The progressive income-tax rates; in the new regime the top slab of 30% plus 25% surcharge and 4% cess is about 39%.Why it matters: this is the rate on a policy surrender and on interest, dividends and short-term gains in a direct portfolio.
- LTCG on foreign shares (section 112(1)(a))
- 12.5% on gains on foreign shares and fund units held over twenty-four months, without indexation since July 2024.Why it matters: on buy-and-hold foreign equity a policy loses, because it turns 12.5% into slab rate on surrender.
- Deferral
- The absence of an annual tax charge on growth inside a policy; tax arrives on receipt. We found no published CBDT position taxing the inside build-up each year.Why it matters: it is the policy’s income-tax case for a resident, and it needs a long horizon and slab-taxed income to beat the costs. How India taxes a foreign policy
- DTAA
- A Double Taxation Avoidance Agreement, India’s treaty with another country; India has one with Singapore and one with Luxembourg.Why it matters: it settles residence tie-breaks and relief for tax paid abroad; it does not make a policy exempt.
- Income-tax Act 2025
- Act 30 of 2025, in force from 1 April 2026, replacing the 1961 Act with renumbered sections. Section 206C(1G) became section 394(1); other correspondences should be taken from the official concordance.Why it matters: a written opinion should cite the 2025 Act by number.
- Schedule FA
- The schedule of ITR-2 and ITR-3 in which a resident and ordinarily resident taxpayer reports foreign assets held at any time in the calendar year, including a Foreign Cash Value Insurance Contract with its surrender value.Why it matters: the policy appears every year; RNORs and NRIs do not file it. Schedule FA and a foreign life policy
- Black Money Act 2015
- The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015: 30% tax, ₹10 lakh a year for an omitted foreign asset, and prosecution.Why it matters: it is the cost of leaving a foreign policy out of the return.
- FAST-DS 2026
- The Foreign Assets of Small Taxpayers Disclosure Scheme under the Finance Act 2026: a window from 16 August to 31 December 2026 to declare unreported foreign assets, with a ₹1 lakh fee for assets acquired from NRI earnings or taxed income up to ₹5 crore.Why it matters: it is the cheap way out for a returning NRI who never listed the policy. FAST-DS 2026 and your foreign life policy
- CRS and FATCA
- The OECD Common Reporting Standard, under which India has exchanged account data since 2017, and the US FATCA agreement of 2015. A cash value insurance contract is a reportable account.Why it matters: the insurer’s country sends the policy’s balance to the CBDT; privacy is from the public, not the tax department.
- PPLI (private placement life insurance)
- A market term, not an Indian legal category: a unit-linked life policy from an insurer outside India, built around one family’s separately managed portfolio, usually from USD 2 million. Not to be confused with PLI, India Post’s Postal Life Insurance.Why it matters: everything on this site. PPLI under Indian law
- ULIP
- Unit Linked Insurance Plan, the Indian retail policy whose premium goes into the insurer’s funds, regulated by IRDAI, with a five-year lock-in and a ₹2.5 lakh premium ceiling for the maturity exemption.Why it matters: it is the policy Indian families know, and the comparison that explains PPLI. PPLI vs ULIP
- IRDAI, IFSCA and IIO
- IRDAI regulates insurers in India. IFSCA regulates GIFT City, where an IFSC Insurance Office (IIO) may issue policies in foreign currency.Why it matters: an IIO policy has its own tax exception and an unresolved FEMA question for residents. GIFT City life insurance
- Separate account and custodian
- The account inside the insurer that holds one policy’s assets apart from the insurer’s general account; the custodian bank holds those assets, and in Luxembourg its appointment is required by law.Why it matters: it is the basis for the assets surviving the insurer’s insolvency and for tax falling only on receipt.
- Investor control
- The principle that the policyholder chooses the strategy and the manager but not individual trades; a policy the policyholder directs can be treated as the policyholder’s own account. A US doctrine first, with equivalents in several countries.Why it matters: the manager’s discretion is a condition of the structure, not an inconvenience.
- Surrender value and sum assured
- The surrender value is what the insurer pays if the policy is cashed in now; the sum assured is the guaranteed death benefit. In a PPLI the death benefit sits just above the cash value.Why it matters: the surrender value is the Schedule FA figure and the FAST-DS figure; the sum assured drives the 10% ratio test.
- Mortality and expense charge
- The cost of the death risk and the insurer’s expenses, the smallest line in a large policy when the death benefit is kept at the minimum.Why it matters: it is one of four charges to have in writing before signing. What a policy costs
- In-kind premium
- Paying the premium by transferring an existing portfolio into the policy rather than cash.Why it matters: the transfer is a disposal for the policyholder’s own tax, and the gain is taxed before the deferral starts.
- Super-privilege (Luxembourg)
- Article 118 of the Luxembourg law of 7 December 2015: policyholders have a first-ranking claim on the assets representing the insurer’s technical provisions.Why it matters: it is the statutory form of the separate-account protection. Singapore or Luxembourg
- Nominee, beneficial and collector
- Under section 39 of the Insurance Act 1938, as amended in 2015, a nominee who is the policyholder’s spouse, child or parent is beneficially entitled to the proceeds; any other nominee collects for the legal heirs. Foreign policies use their own beneficiary designation instead.Why it matters: the form decides who keeps the money. Estate planning in India with a life policy
- MWPA policy
- A policy under section 6 of the Married Women’s Property Act 1874, taken by a married man for his wife and children, held in trust and outside his estate and his creditors’ reach.Why it matters: an Indian mechanism for Indian policies, widely used by business owners.
- Private trust and section 164
- A trust under the Indian Trusts Act 1882 holding the policy; where beneficiaries’ shares are indeterminate the trust is taxed under section 164 at the maximum marginal rate. A trust settled abroad while the settlor was non-resident is reported in Schedule FA once a resident is settlor or beneficiary.Why it matters: the deed, not the nomination form, then decides who gets what and when.
- Estate duty
- The Indian tax on estates under the Estate Duty Act 1953, discontinued for deaths on or after 16 March 1985. India has no inheritance tax or gift tax at death.Why it matters: there is nothing for a policy to save on the Indian inheritance side; the gain is in process and in the exempt death benefit. Inheritance tax in India
- HUF and coparcenary
- A Hindu Undivided Family, a tax entity under the Income-tax Act, and the coparcenary property its members hold by birth under the Hindu Succession Act 1956.Why it matters: a policy bought with HUF funds belongs to the HUF, not to the karta, and passes under different rules.
Exchange control
Income tax
Disclosure
The policy
Succession
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Definitions follow the Income-tax Act, FEMA, the Insurance Act 1938 and the other statutes named on the linked pages. Market terms are marked as such.
Last updated: 20 October 2026
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