Should an NRI Buy an Indian Child Plan If the Child Will Live Abroad?

If your child is likely to study and live abroad, an Indian child plan usually shouldn’t be your main savings for them. It saves in rupees for costs you’ll pay in another currency, and it may be taxed in your country of residence. It can still play a role if part of the goal is in India or you may move back. This article uses Australia as the example.

Where Will the Money Be Spent?

An Indian child plan is usually a life insurance policy on the parent, either a ULIP or a savings plan, with payouts timed to the child’s milestones. If your child’s main costs will be in Australia, it rarely belongs at the center of your plan. The same applies to a ULIP for NRIs in Australia: you pay premiums in rupees from an NRE or NRO account, and fund values and payouts come back in rupees.

What those costs look like depends on your child’s status. A child born in Australia is an Australian citizen if either parent was a citizen or permanent resident at the time of birth, or once the child has lived in Australia until age 10. Citizens in a Commonwealth supported place can usually defer their student contribution through HECS-HELP, so living and accommodation costs may matter more than fees. International students pay fees upfront at the start of each semester.

The Currency Mismatch

The Australian dollar was worth about ₹66.4 on October 14, 2026, and the rate keeps moving. As an illustration, say your plan earns 8% a year in rupees, and the rupee weakens 2% a year against the Australian dollar. Your return in Australian dollars is then about 5.9%. Over 15 years, each rupee grows about 3.2 times in rupee terms, but only about 2.4 times in Australian dollars.

Articles on why NRIs must invest in child plans in India usually point to disciplined saving and a goal in rupees. That reasoning holds when the money will be spent in India, on a wedding or a first home, for example. When it is spent in Australia, the currency gap works against you every year.

What a Child Plan Does Well

Many child plans include a premium waiver. If the parent dies during the term, the insurer pays the remaining premiums and the plan continues to its payout dates, so the savings goal is still met. Check whether your plan includes this or sells it as a paid rider.

You can get the same protection in Australia with term life cover sized to the goal, priced and paid in Australian dollars. Many superannuation funds include some default life cover, so check how much yours provides. An Indian plan still suits families whose child may study in India, or where part of the goal, such as a family property, is in India.

How Australia May Tax It

Australia taxes its residents on worldwide income. Section 26AH of the Income Tax Assessment Act 1936 taxes bonuses received on an eligible life policy within 10 years: in full in years one to eight, two-thirds in year nine, one-third in year 10 and nothing after that. If a premium is more than 25% higher than the previous year’s, the 10-year period can restart, which matters for a plan paid over 15 years.

The rule is written for bonuses, which fits traditional participating plans. How it applies to a ULIP or a guaranteed savings plan is less clear, so have an Australian tax agent review the specific policy before you buy.

What India Taxes

For the tax year starting April 1, 2026, maturity proceeds are tax-free under Section 11 read with Schedule II of the Income-tax Act, 2025 (formerly Section 10(10D)) if annual premiums stay within 10% of the sum assured. Total annual premiums must also stay within ₹2.5 lakh for ULIPs issued on or after February 1, 2021, or within ₹5 lakh for other policies issued on or after April 1, 2023.

If a policy loses the exemption, the gain is taxable in India, and the insurer deducts tax before paying a non-resident. The India-Australia tax treaty may reduce that deduction if you give the insurer a valid Tax Residency Certificate before the payout. Confirm the exact treatment with a tax advisor.

The Australian Alternatives

Investing in your child’s name has a drawback: a minor’s unearned income above A$416 a year is taxed at penalty rates of up to 45%. Many parents invest in their own name instead, or use insurance bonds, which pay tax within the bond and can generally be withdrawn tax-free after 10 years.

Neither option includes a premium waiver. If your family depends on your income, pair them with term cover, and you have both parts of a child plan in Australian dollars.

Getting the Money Where It’s Needed

Payouts from an Indian plan go into an NRE or NRO account. NRE money can be moved abroad freely, while NRO balances can be repatriated up to USD 1 million a financial year after tax, so ask the insurer which account it will pay into.

Payout dates are fixed when you buy. Match each one to when you’ll need the money, such as the start of a semester for fees or the start of a lease for accommodation.

How to Decide

If the goal is in Australia, use Australian investments and term cover. If it’s in India, or you’re likely to move back, an Indian child plan is a reasonable choice. If you’re unsure, split your savings between the two and adjust the split as your plans become clearer.

An Indian child plan works best for a child who will grow up and study in India. For a child who will study and live in Australia, keep most of the savings in Australian dollars.