NPS scheme for NRIs: Non-resident Indians (NRIs) aged 18 to 60 can invest in India’s National Pension Scheme (NPS) by adhering to KYC norms. The NRIs can make contributions to NPS from their NRO/NRE account. NPS offers diversification across financial securities and asset classes (Equity, Corporate Bonds, Government Securities). NRIs can choose their investment mix based on risk appetite. There are two fund management schemes: Active Choice and Auto Choice, catering to individual preferences.
How can NRIs invest in NPS?
Nirav R Karkera (Head – Research, Fisdom) said that an NRI can invest only in the mandatory Tier-I option of NPS. “While various intermediaries offer easy access to the product, an NRI can simply register through the e-NPS website portal as well,” said Karkera
The process would be fairly straightforward while registering with Aadhar, added Karkera.
What is Tier-I account?
Tier-I is a non-withdrawable retirement account that can be withdrawn only upon meeting the exit conditions prescribed under NPS.
NPS minimum account opening
The NPS has a minimum account opening contribution of ₹500, a minimum per contribution of ₹500, and a minimum annual contribution of ₹6,000, said Amit Gupta, MD, SAG Infotech.
Benefit of NPS contribution
Contribution to NPS qualifies for tax deduction under section 80CCD(1) up to 205 of gross total income or 1.5 lakh whichever is lower (deduction under section 80C, 80CCC shall also be subsumed within the 1.5 lakh limit), said Divakar Vijayasarathy, Founder, CEO, DVS Advisors
Additionally, subscribers are also allowed a deduction in addition to the deduction already allowed under Section 80CCD(1) for contribution to the NPS account, subject to a maximum of ₹50, 000 under Section 80CCD(1B) of IT Act, 1961. This is an additional deduction if the 1.5 lakh limit is already exhausted, added Divakar Vijayasarathy.
The NRIs can make contributions to NPS from their NRO/NRE account.
- Fill up the mandatory online form by visiting the NPS portal.
- The account can be opened with PAN, Aadhaar, Digilocker, or using existing KYC records with an Indian bank account.
- In case an applicant selects to open an account with PAN, the activation of the permanent retirement account number (PRAN) is subject to KYC verification by the empanelled banker with which the NRI has an account. The name and address should match with the banker’s record selected by the applicant during the registration process.
- Scan and upload your photograph (optional for Aadhaar) and signature.
- Make online payment (Minimum amount of ₹500) through NRO/NRE account.
- Subscribers will have the option to authenticate the form through OTP Authentication or eSign process.
Withdrawal conditions for NPS
Amit Gupta said, exit and withdrawal guidelines include annuitizing a minimum of 40% at age 60, with a maximum lump sum of 60%. Complete withdrawal is allowed if the corpus is less than ₹2 lakh. Before 60, 80% must be annuitized with a max 20% lump sum if the corpus is less than ₹1 lakh. In case of demise, the nominee can receive 100% of the NPS pension wealth as a lump sum
NPS is among the most cost-efficient and effective investment products available to NRIs. While NPS is an effective tool for retirement planning, it is also good for longer-term wealth creation.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 11 Oct 2023, 02:00 PM IST