NPS for NRIs: Account opening, eligibility, documents, and more

The National Pension System or NPS is a voluntary, government-backed scheme that helps individuals to save for their retirement. To invest in this scheme, one needs to open an NPS account and make regular contributions to it. Non-Resident Indians (NRIs) can also open an NPS account to create their retirement corpus and NPS for NRIs works in the same manner as it does for resident Indians.

However, the procedure to open an NPS account, the eligibility criteria, and the documents required are a bit different when NPS is used by NRIs. This article contains detailed information on what is an NPS account, the types of NPS accounts, the eligibility criteria for NRIs to invest in it, and the step-by-step guide on how to open an NPS account.

What is an NPS account?
 

An NPS account allows the beneficiary to invest in the National Pension System. One can open an NPS account with any of the participating banks or post offices and start making regular contributions to it. The minimum amount required to open an NPS account for NRIs as well as resident Indians is Rs 500. However, the beneficiary needs to contribute at least Rs 1,000 per year thereafter to keep their account active. There is no maximum limit to investing in NPS.

Types of NPS accounts
 

There are two types of NPS accounts available in India -

· Tier-I NPS account
 

A Tier-I NPS account is mandatory for an individual to invest in the NPS scheme. The money deposited into a Tier-I NPS account gets locked until the account holder attains the age of 60. After that, the beneficiary can withdraw up to 60% of the corpus as a lump sum, while the remaining 40% is reinvested into an annuity scheme.

· Tier-II NPS account
 

The Tier-II NPS account offers more flexibility to investors. The amount invested into a Tier-II NPS account is available for withdrawal any time after the completion of ten years from the account opening date. The minimum amount required to open a Tier-II account is Rs 1,000, and one can open this NPS account only if they already have a Tier-I account.

Also read - The ultimate guide to tax saving options in India (for individuals)

Eligibility criteria to open an NPS account for NRI

Here are the eligibility criteria to open NPS for NRIs -

· The age of the NRI should be between 18 and 60 years

· The NRI must be a citizen of India, and they must hold a valid Indian passport. In case the citizenship of an NRI changes after opening an NPS account, their account will become invalid

· The NRI must have an Indian PAN card

· Overseas Citizens of India (OCIs) and Persons of Indian Origin (PIOs) are not eligible to invest in NPS

· NRIs must have an NRI savings account with an Indian bank. If an NRI wants to invest in the NPS on a repatriable basis, they can open a Non-Resident External (NRE) account. If one wants to invest on a non-repatriable basis, one can open a Non-Resident Ordinary (NRO) account

· An NRI must comply with the Know Your Customer (KYC) norms as specified by the Government of India. They must possess all documents required for KYC compliance

Documents required for investing in NPS for NRIs
 

One has to submit the following documents to open an NPS account for NRIs -

· A duly filled NPS subscriber registration form

· A copy of the passport

· A copy of the PAN card

· Proof of address in India

· NRE or NRO bank account details

· A cancelled cheque from the NRI bank account

· Passport-sized photographs

Allocation of funds invested in an NPS account
 

Investments made in NPS are allocated to equities, corporate bonds, and government securities by an appointed fund manager. NPS for NRIs offers the option to choose a fund manager under the “Auto” mode. The fund manager then allocates the investment in various asset classes as per the investor’s age and risk matrix.

Under the “Active” mode, investors have the flexibility to choose the asset allocation for their NPS investments as per their risk appetite and investment objective. 

How to open an NPS account for NRI?

NRIs who meet the eligibility criteria mentioned above can open their NPS account online through the e-NPS facility. Below are the steps they need to follow -

Step 1

Go to the official website of the Pension Fund Regulatory and Development Authority (PFRDA) or the NPS Trust and click on the “e-NPS” option

Step 2

Click on the “Registration” button and select the “New Registration” option

Step 3

Select “Non-Resident Indian (NRI)” as the residential status of the applicant

Step 4
 

Select the option of “Registering with a PAN”

Step 5
 

Enter the Passport number and the PAN number

Step 6

Choose between “Repatriable” and “Non-repatriable” account types

Step 7

Enter the NRE or NRO bank account details and the bank name

Step 8
 

Enter the required personal details, including full name, father’s name, mobile number, e-mail ID, permanent address, current address, etc.

Step 9

Upload the scanned copies of the required documents, signature, and photographs

Step 10
 

Select the type of NPS account, mode of investment, and the pension fund manager

Step 11

Make an initial contribution of Rs 500 through Internet banking

Step 12
 

Print the acknowledgement form and sign it before sending it to the Central Recordkeeping Agency within 90 days of NPS registration

Note that an NRI can open only a Tier-I NPS account through the e-NPS facility. Opening a Tier-II NPS account for NRIs is not allowed under this facility.

One can also open an NPS account offline by submitting a duly filled copy of the NPS subscriber registration form at an authorised bank branch. The payment can be made through a cheque or a Demand Draft (DD) in such a case.

Benefits of investing in NPS for NRIs

An NRI can invest in the NPS scheme to avail of the following benefits - 

· A steady income after retirement
 

A portion of the accumulated NPS corpus is available for withdrawal at the time of retirement. The remaining portion is invested in an annuity scheme to provide a regular income to the beneficiary.

· Low amount of investment
 

NPS for NRIs is one of the best investment instruments. They can start with as low as Rs 500. Moreover, the management costs for NPS are very nominal.

· Higher returns
 

NPS for NRIs allows them to invest in market-linked instruments and earn high returns. Additionally, the investor has the flexibility to choose the fund manager and asset allocation.

· Tax benefits
 

There are several tax benefits of NPS for NRIs. The contributions made towards an NPS account are available for tax deductions of up to Rs 1.5 lakhs under Section 80C of the Income Tax Act, 1961. An additional tax benefit of Rs 50,000 is available under Section 80CCD (1B).

Also read - Importance of tax planning in building long-term wealth and maximise savings

To conclude  

NPS for NRIs allows them to secure their retirement along with tax-saving benefits. One can open an IDFC FIRST Bank NRI Savings Account to start investing in NPS seamlessly. These NRI savings accounts allow 24X7 funds transfer on a repatriable/non-repatriable basis, along with several other benefits and features. To know how to open an NRI account with IDFC FIRST Bank.

Disclaimer

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