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:
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 |
|
| 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
|
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:
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).
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 |
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.
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