Non-resident Indians (NRIs) and Overseas Citizens of India (OCIs) have the opportunity to invest in the National Pension System (NPS), which offers various benefits for their retirement planning. Here are the key details that NRIs and OCIs should be aware of when considering NPS investments:
Why Invest in NPS?
NPS is a government-regulated retirement savings scheme in India that empowers individuals to contribute to their pension accounts, providing control and financial security. It offers diverse pension investment options tailored to individual preferences and risk appetites, allowing for a personalized retirement savings strategy.
Differences for NRIs and OCIs:
- NRIs need to make a minimum contribution of Rs. 500 initially and a minimum annual investment of Rs. 6,000 to keep the account active (compared to Rs. 1,000 for domestic investors).
- There is no upper limit for NRIs’ NPS investments.
- The accumulated corpus in NPS is repatriable for NRIs/OCIs, allowing funds to be transferred abroad, which domestic investors cannot do.
How to Invest:
NRIs can open NPS accounts with banks on a repatriable or non-repatriable basis and invest using their Non-Resident External (NRE) or Non-Resident Ordinary (NRO) bank accounts. PFRDA regulations do not significantly distinguish between resident Indians and NRIs/OCIs, except for currency exchange norms. NRIs cannot invest in Tier 2 NPS accounts.
Contributions:
NRIs must contribute from their NRE/NRO accounts, and withdrawals will be credited in Indian Rupees (INR) to the NRO Account.
Tax Benefits:
NRIs can enjoy the same tax benefits as domestic subscribers, including deductions under sections 80C and 80CCD1B of the Indian Income Tax Act. They can claim deductions of up to INR 1,50,000 under section 80C and an additional INR 50,000 under section 80CCD 1(B) annually on their NPS investment.
Age Limit and Documents Required:
NRIs aged between 18 and 70 can obtain a Permanent Retirement Account Number (PRAN) for NPS. Required documents include Aadhar number linked to a mobile number, a signature copy, a cancelled cheque or PAN details, and a passport.
Investment Amount:
NPS offers flexibility, with a minimum contribution per transaction of Rs. 500 and a minimum annual contribution of Rs. 1,000. There is no maximum limit, allowing investors to build their retirement corpus according to their financial goals.
Withdrawal on Maturity:
Upon maturity, NRIs must purchase mandatory annuities in India. The 60% withdrawal can be credited in INR to the NRO Account and subsequently repatriated to other currencies. The remaining 40% of the corpus must be invested in an annuity plan based on the investor’s choice, with tax treatment determined by the Double Taxation Avoidance Agreement (DTAA) of their country of residence.
Withdrawal Before Maturity:
NRIs can partially withdraw from Tier I NPS accounts after three years of investment, with a maximum of 25% of the invested amount allowed per withdrawal, and a maximum of three withdrawals in a lifetime.
Country-Specific Restrictions:
Currently, there are no country-specific restrictions for NRIs to invest in NPS; currency exchange norms will apply.
Important Considerations:
NRIs and OCIs should meet age requirements, have valid NRE/NRO bank accounts, comply with KYC norms, and possess a valid Aadhaar or PAN card. They can only open Tier I NPS accounts, and if they cease to be Indian citizens, their NPS subscription will be discontinued.
