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Complete Guide to National Pension System (NPS) for NRIs

National Pension System (NPS) is a voluntary, defined contribution retirement savings scheme. The NPS has been designed to enable systematic savings during the subscriber’s working life.

It is an attempt towards finding a sustainable solution to provide adequate retirement income to every citizen of India.

Since October 2015, Non-resident Indians have been allowed to open accounts under the NPS. By opening an NPS account, NRIs can create a pension corpus in India.

How NPS works

At the time of a normal exit from NPS, the subscribers may use the accumulated pension wealth under the scheme either to purchase a life annuity from a PFRDA empanelled life insurance company or withdraw a part of the accumulated pension wealth as lump-sum, if they choose to do so.

Features and benefits of NPS account for NRI

There are two investment options:

Every subscriber is given a Permanent Retirement Account Number (PRAN) Card with a unique 12-digit number.

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.

Who can subscribe

How to open NPS account

NPS is distributed through authorized entities called Points of Presence (POP). Almost all the banks (both private and public sector) in India are enrolled to act as Point of Presence under NPS.

To invest in NPS, you are required to open an NPS account through a POP bank, preferably where you have your NRI account.

You can send your NPS application form to your Bank for opening of the NPS account.

Overseas address and contact details as well as permanent Indian address need to be provided. You have the option of selecting the Pension Fund Manager.

Documents required

The following documents need to be submitted to the POP bank for opening the NPS account:

How to contribute to NPS account

The contributions made into the NPS account by the NRIs can be from either NRE or NRO accounts subject to normal foreign exchange conversion norms.

How to check the status of NPS

After submission of documents, you can check the status by accessing https://cra-nsdl.com/CRA/ by using the 17 digit receipt number provided by POP-SP or the acknowledgement number allotted by CRA-FC (Facilitation Centre) at the time of submission of application forms by POP-SP.

Exit & withdrawal rules

a) Upon attaining the age of 60 years

b) Exit from NPS before the age of 60 years

Upon Death of the Subscriber

In such an unfortunate event, option will be available to the nominee to receive 100% of the NPS pension wealth in lump sum.

Nominees for NPS account

In such a case you are required to specify the percentage of share, which should not be in decimals that you wish to allocate to each nominee. The share percentage across all nominees should collectively aggregate to 100%.

Points to note

If the NRI has taxable income in India, he can get additional benefit of  Rs 50,000 offered by NPS over and above the 80C benefits.

It is preferable to open an NPS account through the POP bank where the NRI maintains his NRE/NRO account.

At the time of payment of pension or annuity, the same is paid only in INR. There is no restriction on repatriation.

Additional resources

Published on 30 January 2017