NPS is a famous retirement saving scheme in India. NRI can join NPS scheme online with PAN or Aadhaar. NRI NPS investment is allowed as per the Foreign Exchange Management Act. So, NRI who wish to settle in India post-retirement for whatever reason can go for NPS investment for building a retirement corpus. NPS offers a mix of equity and debt investment. This means it turns out to be a good investment option. In this post, we will take a look at the various feature of NRI NPS account along with key features and exit/withdrawal rules.
Why & When NRI Should Invest in NPS?
Few compelling reasons for investing in NPS for NRI are given below.
- In the past few years NPS has given above average returns to investor compared to other investment options.
- NPS is a cost-effective option where NRI can build a good corpus and also repatriate the money easily.
- NPS provides an additional tax benefit of Rs.50000 over and above tax benefit of section 80C.
- It is very difficult for NRI of USA and Canada to invest in the Indian Mutual Funds and equity market due to tough compliance law under FATCA. NPS allows you to submit FATCA online.
- If you are NRI and planning to stay in India post-retirement you can plan to invest in NPS.
Eligibility for NRI NPS Account
The eligibility criteria for NRI NPS investment are given below. If you are NRI and complying with following conditions you can open NPS account.
- Age: Between 18 and 60 years old.
- Must comply with KYC norms.
- PIOs and OCIs are not eligible.
The source of contribution should be from NRE account or NRO account. Minimum contribution at the time of opening account is Rs.500. Minimum amount per contribution is Rs.500. The minimum contribution of Rs.6000 is required per annum.
Key Features and Benefits of NRI NPS Account
- The investment portfolio is well diversified across financial securities. Investor has flexibility to select fund ratio across investment options.
- Investment can be made across asset class like Equity (E), Corporate Bonds (C) and /or Government Securities (G). This is to ensure that impact or return will be minimum in case market is down.
- Two investment options are given to NRI –
- Active Choice – NRI would decide asset classes in which the contributed funds are to be invested and their respective proportions.
- Auto Choice – Default option under NPS, management of investment of funds is done automatically based on the age profile of the subscriber.
- On successful registration PRAN (Permanent Retirement Account Number) is generated with unique 12 digit number.
- NPS account can be operated online from anywhere.
- There are two available sub-accounts under the NPS account scheme:
- Tier – I accounts: Withdrawals are allowed for up to 25% of the borrowers own contribution. This is subject to the Withdrawal and Exit Regulations.
- Tier – II accounts: This account is allowed as an add-on to Tier – I accounts, as a savings facility. Withdrawals are permitted as and when the investor wishes from Tier – II accounts.
How to register and apply for NPS for NRI?
Follow the steps given below to apply for NPS for NRI.
- Download Subscriber registration form for NRI. This form is available under form section of NPS NSDL and PFRDA website
- This form can also be downloaded from respective Bank websites.
- NRI need to fill up the form and submit it to his/her NRI Bank branch in India for processing.
- Bank Verifies and confirms NRO /NRE account particulars and forward the form to CRA.
- Now you need to deposit cheque for initial contribution.
- Your application will be digitized and PRAN will be generated at CRA.
- An email or SMS will be sent to NRI applicant mentioning PRAN Number.
- Subsequent transactions can be done online.
Exit and Withdrawal rules for NPS
The exit and withdrawal rules applicable NRI for NPS are given below.
- For exit from the scheme before the age of 60:
- Compulsory Annuitisation – Minimum of 80%.
- Lump Sum withdrawal – Maximum of 20%.
- If the total corpus is less than 1 Lakh complete withdrawal.
- For exit upon attaining the age of 60:
- Compulsory Annuitisation: Minimum of 40%.
- Lump Sum withdrawal: Maximum of 60%.
- If the corpus is less than 2 Lakh complete withdrawal.
- Investors can stay invested in the scheme up to the age of 70 years.
- Purchase of annuity can be deferred for a maximum period of 3 years at the time of exiting the scheme.
- Exit upon death of the subscriber:
The nominee will be instantly eligible to receive 100% of the NPS Pension wealth in a lump sum.
Over to you –
Do you recommend NRI to invest in NPS? Do share your views in the comment section.