Can an NRI invest in NPS?
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Key Takeaways: The National Pension Scheme (NPS) is a retirement savings plan for Indian citizens. In this article, we will talk more about whether NRIs can invest in this scheme.
Under the NPS, individuals can subscribe and contribute regularly towards their retirement. When they retire, they can withdraw a part of their corpus, and invest the rest in an annuity which will get them a regular income post-retirement. It is a tax-saving and cost-efficient investment option, but can you invest in it if you are an NRI?
Yes, as an NRI, you can invest in a National Pension System. This facility has also been extended for Overseas Citizens of India to help them plan for their retirement. You can choose the amount to contribute in your NPS account, change the type of investment plan and receive income tax exemptions in India.
The eligibility criteria for subscribing to the NPS is straightforward:
- Individuals who are Indian Citizens (including NRIs) between 18-65 years of age.
- The individual must be KYC compliant.
- The NPS subscription will discontinue if you cease to remain a citizen of India.
Account Opening Procedure for NRIs
Follow these steps to subscribe to the NPS; you will need to have a valid e-mail address and an Aadhaar registered mobile number:
- Head to the official NPS website
- Choose 'Individual Subscriber'
- Choose 'NRI' as your residential status
- Choose 'Tier I' as your account type since Tier II is unavailable for NRIs
- Enter your PAN/Aadhaar details, and choose your Point of Presence (POP) service provider. Ideally, your selected POP will also do your KYC.
- Upload a scanned copy of your PAN/Aadhar card, cancelled cheque, photograph and signature. Each of them must be between 4KB to 2MB in size and JPG or PNG formats.
- Next, choose whether your bank account is repatriable or non-repatriable.
- Provide the details of your NRO or NRE bank account.
- Upload a scanned copy of the completed form, your Aadhaar/PAN card and passport.
- Provide an address for communication. It can be either your permanent address or overseas address. Please note, communication to an overseas address will incur additional charges.
- Pay the required charges through net banking.
- Once the payment is completed, you will receive your Permanent Retirement Account Number (PRAN).
Once you receive your PRAN, you need to authenticate your application. You can do this in one of two ways:
- Choose the 'e-sign' option; authenticate the request with the OTP sent to your PAN/Aadhaar card linked mobile number.
- Choose the 'print and courier' option; stick your photograph and sign the application form; send the form within 90 days of the PRAN allotment. You can send it to the bank where you have your NRI account.
Features and Benefits of investing in NPS
The National Pension System's well-thought-out features and accompanying benefits have made them popular amongst NRIs. Let's take a look at what these features are and how they benefit you:
- It is location agnostic.
You can move anywhere in the world and continue with your NPS subscription as long as you remain a citizen of India.
- It is voluntary.
Your status as an NRI or the kind of job you do does not affect how much you need to contribute towards your account. You are free to contribute whatever amount you want.
- It is flexible.
In an NPS, you can choose between equities, government securities, corporate bonds or a mixed-asset class. If you prefer to leave the investment management to the fund manager, you can opt for 'Auto choice' of investment instead of 'Active choice' where you decide which asset class to invest in. You can switch between the two at any point of your investment.
- It is regulated.
Afraid of how you will keep an eye on your contributions if you live thousands of miles away? Don't worry; the NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It keeps an eye on the performance of the funds and ensures there are no irregularities.
- It has the facility for partial withdrawals.
Need some urgent funds? You can withdraw up to 25% of your total corpus, in case of emergency financial needs. However, you need to have made contributions for at least 10 years to be eligible for such a withdrawal. Furthermore, there needs to be at least a 5-year gap between your withdrawals.
- It offers tax exemptions.
You can claim up to INR 1,50,000 as deductibles u/s 80C of the Income Tax (IT) Act. This amount is contingent on no other investments being declared under this section of the IT Act. You can further claim a tax deduction of INR 50, 000 u/s 80CCD 1(B) annually on your NPS investment. When you turn 60, you can withdraw upto 40% of your corpus without any tax liability. Additionally, if you purchase an annuity with the remaining 60% corpus, that will also be exempted from tax. However, any income earned from the annuity is taxable as per the relevant tax bracket that the NRI fits in.
These features and benefits make an NPS an attractive post-retirement plan for NRIs.
Final Note: Subscribing to the National Pension Scheme is a good way to plan for life after retirement and ensure your future financial health. It is convenient to start and you as an NRI can continue to hold your NPS all the way till retirement without any hassle.
Reach out to us and our Relationship Managers will be happy to guide you. Apply now!
*This article is for information purposes only. We recommend you take advice from an income consultant regarding tax calculation and computation.