National Pension Scheme for NRI

Understand how to open an NPS account as an NRI and what are its benefits.
NPS for NRI
4 mins
22 January 2024

The National Pension Scheme (NPS) is a government-sponsored retirement savings initiative in India, gaining popularity not only among residents but also Non-Resident Indians (NRIs). This comprehensive guide explores the various aspects of NPS for NRIs like what the eligibility criteria are, tax implications, account opening process.

What is National Pension Scheme (NPS)?

The National Pension Scheme (NPS) is a voluntary long-term retirement savings scheme offered by the government of India. NPS allows individuals to create a pension corpus during their working years, which can be used to secure a regular income post-retirement.

The scheme requires yearly contributions until maturity. Afterward, it guarantees regular pensions for life, providing a steady income post-retirement. NRIs can enroll in the NPS and contribute towards their pension fund.

How to invest in National Pension Scheme (NPS) as NRI?

  1. Visit the official eNPS website.
  2. Click on 'National Pension System' and then select 'Registration.'
  3. Choose 'Non-Resident of India' in the 'Status of Applicant' field.
  4. Register online using your PAN card number, select 'Permanent Account Number' under 'Register With.'
  5. Provide details such as NRE (Non-Resident External Account) or NRO (Non-Resident Ordinary Account) bank account number, passport number, PAN card number, and current country of residence.
  6. Click on 'Continue.'
  7. Specify your investment details, select the scheme, and choose a pension fund manager.
  8. Upload scanned copies of your documents, signature, and photograph.
  9. Complete the form, then print it.
  10. Sign the printed form and send it to the Central Recordkeeping Agency within 90 days of NPS registration to avoid account freezing.

Eligibility criteria

  • The scheme is open to NRIs aged between 18 to 60 years.
  • NRIs must comply with the Know Your Customer (KYC) norms.
  • Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs) are not eligible for participation.

Details of National Pension Scheme for NRI

  1. Continuity of investments: Your NPS investments will continue as long as you are Indian citizen. Changes in citizenship status will result in the closure of the NPS account.
  2. Choice of pension fund manager: Select from 7 pension fund managers appointed by the Pension Fund Regulatory and Development Authority (PFRDA). You have the flexibility to change your chosen manager during the investment period.
  3. Investment modes: Choose between active and auto investment modes. In active mode, you have to specify the funds you want to invest and how much you want to allocate (in percentage) in each fund, while in auto mode you have to choose your risk profile and your funds are allocated automatically according to your risk profile.
  4. Nomination facility: Appoint nominees to receive the fund value in case of demise. The NRI pension scheme allows the appointment of up to 3 nominees.
  5. Account opening and contributions: To open a tier I NPS account for NRIs, make an initial contribution of a minimum of Rs. 500. Additionally, a minimum yearly investment of Rs. 6,000 is required to keep the account active until maturity.
  6. No maximum investment limit: There is no upper limit on investment, you can invest as much as you want.
  7. Permanent Retirement Account Number (PRAN): Upon successful opening of the NPS account, a Permanent Retirement Account Number (PRAN) will be provided.

Benefits of NPS for NRI

  1. The NPS for NRI account, limited to tier-I, matures when the subscriber reaches 60 years of age.
  2. NRIs can remain invested in the NPS until the age of 70 years, with the option for continued fresh investment.
  3. Lump sum receipt and annuity investment can be deferred up to 70 years and a maximum of 3 years after maturity.
  4. Upon maturity, 60% of the corpus is disbursed as a lump sum to the subscriber's NRE or NRO account, and the remaining 40% is mandated for investment in a suitable annuity for a steady pension income through a qualified scheme annuity provided by the Annuity Service Provider (ASP).
  5. You have the flexibility to select your fund manager, investment option, and asset allocation based on your risk tolerance and financial objectives. Additionally, you can switch between fund managers and investment options annually. Furthermore, the option for partial withdrawals is available, allowing you to access funds for specific purposes as needed.

Tax benefits of investing in NPS for NRI

NRIs receive tax benefits of up to Rs. 1.5 lakh under Section 80CCD (1) and is part of the overall limit of Section 80C.

Additionally, NRIs can enjoy an extra deduction under Section 80CCD (1B) for NPS investments, allowing up to Rs. 50,000. This is in addition to the deduction provided under Section 80CCD (1).

Withdrawals from NPS for NRI

You can withdraw some amount for specific needs like education expense, medical expenses, or buying a house, etc. This is allowed after 3 years of account opening, and you can withdraw up to 25% of the fund value at once.

In the event of the account holders’ demise, the nominee can receive up to 100% of the accumulated corpus if the fund value is less than Rs. 1 lakh.

Conclusion

National Pension Scheme is considered as practical option for retirement planning. It allows flexible contributions and ensuring guaranteed pensions after retirement, makes it a preferred choice for securing financial future post-retirement.

Disclaimer

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