NPS for NRI/ OCI/ PIO

The National Pension System (NPS) is a government-backed retirement savings scheme designed to provide financial security during your post-retirement years. NPS is open to Non-Resident Indians (NRI), Overseas Citizens of India (OCI), and Persons of Indian Origin (PIO). This scheme offers you an opportunity to build a stable and secure retirement fund, regardless of your current residence status. This flexible and transparent pension scheme offers a range of investment options, tax benefits, and a systematic approach to building wealth for your retirement needs. In this introduction, we will explore the key features and benefits of NPS for NRIs.

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About NPS for NRI/ OCI/ PIO

The full form of NPs is the National Pension System, which is a retirement savings plan available to Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and Persons of Indian Origin (PIOs).

This pension plan allows you to invest in a well-spread market-linked financial asset, which helps to maximize the returns and minimize the impact on your investments, even when the market is not doing well.

You can choose the preferred mix of investments, like:

  • Equities (E)

  • Corporate Bonds (C)

  • Government Securities (G)

Also, the NPS for NRI scheme offers you the following two ways of Fund Management Schemes (FMS) to invest your money:

  •  Active Choice: In this option, you decide how your funds are invested. You choose the asset classes (like stocks, bonds, or government securities) and determine the percentages for each (e.g., up to 50% in stocks, among others).

  • Auto Choice - Lifecycle Fund: This is the default option. It manages your investments automatically based on your age.

This flexibility ensures that your investments are designed as per your own risk tolerance.

NPS for NRI offers a tax-efficient and flexible way to save for retirement, helping you to secure your financial future, irrespective of your current residency status. 

Features of NPS for NRI/ OCI/ PIO

The key features of an NPS for NRIs, OCIs, and PIOs are mentioned in the table below:

Features Details
Government Regulating Agency
  • Pension Fund Regulatory and Development Authority (PFRDA)
  • Ensures transparency and security
Account Types
  • Tier I: Mandatory pension account
  • Tier II: Voluntary savings account (not available with NRIs and OCI/ PIOs)
Source of Contribution
  • NRE Account
  • NRO Account
Minimum Contribution
  • Rs. 500 at a time, and
  • Rs. 6,000 per annum
Investment Options
  • Equity (E)
  • Corporate Bonds (C)
  • Government Securities (G)
Portability NPS accounts can be easily transferred or ported across various financial institutions and locations.
Flexible Contributions Flexibility in choosing the contribution amount based on financial capacity.
Diverse Asset Allocation Diversified portfolio to reduce risk, with options to adjust asset allocation based on risk appetite.
Regular Statements You receive periodic statements and updates regarding your NPS account.
Withdrawal Options
  • Partial withdrawals are allowed for specific purposes like education, home purchase, and medical expenses.
  • You have the flexibility to withdraw up to 25% of the fund value in a single withdrawal.
Retirement Benefits On retirement, you can withdraw a portion as a lump sum and use the remaining corpus to purchase an annuity for regular income.
Tax Benefits
  • Deductions on taxable income of up to Rs. 1.5 lakhs under Section 80CCD(1b) of the Income Tax Act, 1961
  • Additional deductions of up to Rs. 50,000 under Section 80CCD(1) of the IT Act, 1961

Investment Plans for NRIsInvestment Plans for NRIs

Eligibility Criteria for NPS for NRI/ OCI/ PIO

The eligibility criteria for NPS for NRI/OCI/PIO are as follows:

  • Age: 18 to 70 years

  • Citizenship: All Indian citizens (Residents and NRIs)

  • Cardholders: OCI and PIOs are also eligible to join the NPS scheme (since notification by the Government of India in 2019).

  • KYC Compliance: Compliant with KYC norms

Documents Required to Apply for NPS for NRI/ OCI/ PIO

An NRI must prepare the following documents to apply for the NPS scheme:

Document Type Description
Proof of Identity (PoI)
  • Passport (mandatory)
  • Aadhar Card (if available)
  • OCI card (if applicable)
Proof of Address (PoA)
  • Passport (mandatory)
  • Overseas Address Proof (utility bill, rental agreement, etc.)
Proof of Date of Birth (DoB)
  • Passport (mandatory)
  • Birth Certificate (if applicable)
  • OCI/PIO Card (if applicable)
KYC (Know Your Customer) Documents
  • Passport (mandatory)
  • PAN (Permanent Account Number) Card (mandatory)
  • Visa and work permit (if applicable)
  • Proof of Overseas Address (utility bill, rental agreement, etc.)
Bank Account Details
  • NRE (Non-Resident External) or NRO (Non-Resident Ordinary) bank account statement
  • Passbook with an active and valid account
Passport-size Photographs Recent passport-size colour photographs of the applicant.

Steps to Apply for NPS for NRI/ OCI/ PIO

To apply for NPS for NRIs, OCIs, and PIOs, you can follow the steps mentioned below:

Step 1: Visit the PFRDA website and click on the "eNPS" link.

Step 2: Select "New Registration" and then select "Non-Resident Indian (NRI)" as your account type.

Step 3: Enter your personal details, such as your name, date of birth, and contact information.

Step 4: Choose your investment options and select a fund manager.

Step 5: Upload the required documents, such as your PAN card, Aadhaar card, and NRI/ OCI passport.

Step 6: Choose from the following one or both NPS Tiers depending on your financial goals:

  • Tier I: Mandatory retirement savings account with certain withdrawal restrictions.

  • Tier II: Voluntary savings account with more flexible withdrawal options.

Step 7: Make an initial contribution of at least Rs. 500.

Step 8: Once your application is processed, you will be assigned a Permanent Retirement Account Number (PRAN).

Investment Plans for NRIsInvestment Plans for NRIs

Read Here: Pros and Cons of NPS

Benefits of NPS for NRI/ OCI/ PIO

An NRI, OCI, or PIO can avail of the following benefits by joining the NPS pension plan:

  • Global Access: NRIs can participate in NPS from anywhere in the world, making it a convenient retirement savings option.

  • Tax Benefits: NPS offers tax benefits, such as deductions of up to Rs. 1.5 lakhs under Section 80CCD(1B) of the Income Tax Act, which can reduce taxable income. Additionally, you can claim an additional deduction of up to INR 50,000 under Section 80CCD(1) of the Income Tax Act, 1961.

  • Flexible Contributions: You have the flexibility to choose how much you want to invest in NPS, allowing you to tailor your savings according to your financial capacity.

  • Diverse Investment Choices: NPS provides a range of investment options, including equity, debt, government securities, and fixed income, catering to different risk preferences and financial goals.

  • Wealth Accumulation: The power of compounding can help your savings grow significantly over time, ensuring a comfortable retirement.

  • Flexibility in Withdrawals: You can withdraw a part of your accumulated corpus from the NPS for NRI at the age of 60 years. The remaining corpus must be used to purchase an annuity plan, which will provide you with a regular income in retirement.

  • Secure Retirement: NPS is a government-regulated scheme providing a secure and regulated environment for your retirement savings.

  • Portability: NPS accounts can be easily transferred or ported across various financial institutions, ensuring flexibility and convenience.

Check Here: NRI Tax in US

NPS Vs. NRE Vs. NRO Account

Let us understand below the difference between an NPS account, NRE account, and NRO account for NRI:

Feature NPS NRE Account NRO Account
Account Type Retirement savings scheme Non-Resident External account Non-Resident Ordinary account
Eligibility Indian citizens between the ages of 18 and 70 Indian citizens, or OCI card holders residing outside India Indian citizens, or OCI card holders residing outside India
Investment Options Equity, debt, and government securities Foreign currency and Indian Rupees Indian Rupees only
Tax Benefits Tax deduction of up to INR 1.5 lakh under Section 80CCD(1b) of the Income Tax Act, 1961 No tax on interest earned on NRE accounts Tax on interest earned on NRO accounts
Withdrawal Flexibility Partial withdrawal at the age of 60 years No restrictions on withdrawals No restrictions on withdrawals

investment plans for nrisinvestment plans for nris

In Conclusion!

The National Pension System (NPS) offers NRIs, OCIs, and PIOs a viable avenue for long-term retirement savings with the added benefit of potential tax advantages. NPS for NRI provides a structured and flexible retirement planning platform, allowing you to secure your financial future in India. It is essential for an NRI to carefully consider your retirement goals and make informed decisions about incorporating NPS into your financial strategy.

FAQ's

  • What is the National Pension System for NRI?

    The National Pension System (NPS) is a government-sponsored retirement savings scheme available to all Indian citizens, including Non-Resident Indians (NRIs). It is a voluntary scheme that offers a variety of investment options, tax benefits, and flexibility in withdrawals.
  • Who is the regulator for NPS?

    The Pension Fund Regulatory and Development Authority (PFRDA) is the regulator for the National Pension System (NPS). It is a statutory body established by the Government of India under the PFRDA Act, 2013. The PFRDA is responsible for regulating and developing the NPS and for protecting the interests of NPS subscribers.
  • Can an NRI open an NPS account?

    Yes, Non-Resident Indians (NRIs) can open a National Pension System (NPS) account. However, the Tier II account is not available to NRIs.
  • Can an OCI open an NPS account?

    Yes, Overseas Citizens of India (OCIs) can join the National Pension System (NPS) scheme. The Pension Fund Regulatory and Development Authority (PFRDA) announced in October 2019 that OCIs would be allowed to enroll in the NPS on par with Non-Resident Indians (NRIs). However, The NPS Tier II account is not accessible to either NRI or OCI subscribers.
  • Can an NRI get a loan under NPS?

    No, NRIs (Non-Resident Indians) are not eligible to get loans under the National Pension System (NPS). NPS primarily serves as a retirement savings scheme and does not offer loan facilities to its subscribers.
  • Can a Subscriber reset the I-PIN (Internet Password) online?

    Yes, a subscriber can reset the I-PIN (Internet Password) online using the following steps:
    • Go to the CRA website

    • Click on the Forgot Password link.

    • Select the Instant Reset IPIN option.

    • Enter your PRAN, date of birth, and new I-PIN.

    • Click on the Submit button.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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