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How Can NRIs Invest In The National Pension System (NPS)?

The National Pension System (NPS) is a retirement planning tool open for non-resident Indians (NRIs) as well.

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Outlook Money
January 29, 2024
How Can NRIs Invest In The National Pension System

How Can NRIs Invest In The National Pension System

The National Pension System (NPS) is a small savings scheme for retirement planning for resident and non-resident Indians (NRIs). According to the Pension Fund Regulatory and Development Authority (PFRDA) guidelines, an NRI can open an NPS account. However, it would be closed if the resident status changes after opening the account. Let’s understand How Can NRIs Invest In The National Pension System (NPS).

NPS has been made more convenient of late, with facilities like the systematic lump sum withdrawal, QR based D-Remit option, which allows money transfers from your bank account to the trustee bank, and flexibility to choose assets and fund managers for different investment options. So, NPS allows an individual to invest in the scheme while working and living abroad.

NRIs are allowed to invest in all available options, including equity, government securities (G), corporate bonds (C), alternative investments, etc. However, they can invest only in Tier I NPS accounts, not in Tier II, and withdraw a maximum of 60 per cent in a lump sum and the remaining 40 per cent, they must invest in annuity.

Also Read: NPS Grievance Redressal: NPS Trust Coordinator For Grievance Redressal, PFRDA Clarifies In Response To Stakeholders’ Comments

How Can NRIs Open An NPS Account?

The eligibility criteria for NRIs are the same as those for resident Indians except for documents. NRIs between 18 and 70 years old can open an NPS account. Resident Indians link the NPS account with their savings accounts, whereas NRIs link it with the Non-Resident Ordinary Account (NRO) or Non-Resident External (NRE) account, which are repatriable and non-repatriable, respectively. Repatriable means the income earned in India can be sent from the Indian account to a foreign account in any country. This means if they want to repatriate the NPS investment, they can do so through an NRE or an NRO account and vice-versa. They must also comply with the Know Your Customer (KYC) documents, including PAN number, passport, proof of residence, bank account details, etc.

Account Opening:

Step 1: Visit the e-NPS website for account opening

Step 2: Click on registration and select from the repatriable or non-repatriable option

Step 3: Select the country of residence, and passport details, and write PAN details

Step 4: Fill up the details and upload scanned copies of the signature, passport, PAN, photograph, and cancelled cheque.

Step 5: Pay the amount (minimum Rs 500 for Tier I)

The process is complete. Take a printout of the filled form, put your signature on it, and send it to the central recordkeeping agency (CRA) within 90 days of registration.

Why Should One Open The Account?

A regular cash flow is a critical component of retirement planning, and NPS aims to fulfil this need by offering an annuity. The other benefit of NPS is the exempt-exempt-partially exempt tax benefits. One can claim up to Rs 1.5 lakh tax deduction on NPS deposits under Section 80CCE and an additional Rs 50,000 under Section 80CCD(1B) of the Income-tax Act, 1961.

As the Indian economy grows, the market-linked NPS scheme looks attractive. Its tax benefits are the same for NRIs, as they can avail of the 80CCE and 80CCD (1B) benefits. The low investing cost, prospects to earn high returns due to equity exposure, the option to select fund managers, the flexibility of investment amount, and tax benefits make it an attractive small savings scheme. However, the decision to choose this product depends on the individual needs.

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