Why Financial Planning?
Planning is bringing the future into the present so that you can do something about it NOW.
National Pension Scheme For NRI is a retirement scheme of the Government of India. It was much hyped when it was launched but year after year the Indian Government has made so many changes that people are confused. NRIs can consider this post as an all you want to know kind of article.
We have also added 49 NPS in India Faqs at the end of the post – if something is still missing feel free to add in the comment section.
Must Read – Pension Plan For NRI in India – Dream Retirement
Can NRI invest in National Pension Scheme?
A very common question that I hear is “Can NRI NPS India ?” or “Can NRI open NPS account”
Yes, NRIs can open NPSor even continue if their status from resident changes to NRI or vice Versa.
NPS for NRI – Key Features
Let us look at the key features, advantages, and disadvantages of the national pension scheme for NRI.
- It is a voluntary contribution scheme.
- It is a tool to enable savings and investment so that finances for one’s retirement are taken care of.
- The contributions of all account holders are collated and invested by fund managers of the Pension Fund Regulatory and Development Authority (PFRDA).
- The NRI investor has two investing options:-
a. Active Choice: The NRI decides the asset classes that the money should be invested in and the allocation percentage in each investment type.
b. Auto Choice: Investment is done on behalf of the NRI based on his age. - Under the scheme, there are two sub-accounts available:-
a. Tier – I accounts: Withdrawals are allowed for up to 25% of the account holders’ contribution. There are some rules around withdrawal and exit options.
b. Tier-II accounts: These are additional to Tier – I accounts. They are like savings accounts. An NRI can withdraw whenever he wants from these accounts.
Eligibility Criteria for NPS Account
- Age: Between 18 to 60 years old
- Must Comply with KYC norms
- OCIs and PIOs are not eligible
Must Read: Planning for Retirement in India-5 Easy steps NRI can use
How NRIs can open an NPS in India?
- NPS for NRIs application form: You can get the form from this website – NPSCRA It is available with many banks and available on their websites as well. There are many authorized entities called Point of Presence – Service Providers (POP-SP). You can get the form from them as well.
- Complete the form and submit it along with your other documentation to the bank where you have your NRE/NRO accounts. A copy of the passport is also required.
- You will get a receipt number. Go to this website – NSDL to check the status of your application. Once the documents are verified, you will get a Permanent Retirement Account Number (PRAN).
- You can then start depositing money, checking your account, etc.
Must Read – How Much Retirement Corpus Is Enough
What are the rules regarding the Contribution and Withdrawal of the NPS for NRI?
- The minimum contribution at the time of opening the account is Rs. 500(for Tier-I) and Rs. 1000(for Tier-II). The annual contribution should be at least Rs. 1,000. There is no limit on the maximum contribution.
- Minimum contribution per annum: Rs.6,000.
- At the age of 60,i.e, at the time of maturity, 60% of the accumulated corpus can be withdrawn as a lump sum(tax-free) and the remaining 40% needs to go into the purchase of an annuity product from a PFRDA listed insurance company. The annuity income that you earn from the plan will be taxable at the income tax slab rate of your income.
- The withdrawal can be deferred tillthe ageof 70. During thistime, contributions can be made.
- If the total amount is equal to or less than Rs. 5,00,000, then it has to withdraw entirely.
- The annuity purchase can be deferred for up to 3 years.
- If you are withdrawing before the age of 60, 80% has to be invested in an annuity product, and if the corpus is less than Rs. 2,50,000, then it has to be withdrawn completely.
- Up to 25% of the contribution can be withdrawn if you are a subscriber for at least 10 years and the reason is one of the following –
- Higher education,
- Marriage of children,
- Purchase or construction of residential flat and
- Treatment of specified illnesses
- If you are returning back to India, the NRI National Pension Scheme account should be closed.
Check – Best NRI Investment Options in India
What kind of Investment and Returns can be expected?
Investments are made in the following assets based on the choice –
- Asset class E: “High return, High risk” such as equity-related instruments.
- Asset class G: “Low return, Low risk” such as Government bonds.
- Asset class C: “Medium return for credit risk” such as bonds issued by companies.
- Asset Class A: “High return, High risk”Alternative Investment Funds including instruments like CMBS, MBS, REITS, AIFs, Invites, etc.
NPS in India Returns are market-driven. There is no guaranteed amount of return. The returns generated through investments are accumulated in the corpus.
Are there any Tax Benefits of the National pension scheme for NRI?
You can get a deduction of Rs. 50,000 while calculating taxable income over and above the other 80C deductions, under section 80CCD(1B).
Also Read – Mr. NRI – Time Is Money When it Comes to Retirement Planning!
Can NRI appoint nominees for my NPS account?
You have to appoint a nominee at the time of opening the account. Three nominees can be appointed for Tier I and Tier II accounts.
FAQs – NPS In India
I hope these 49 Questions will answer all your queries.
Should NRI Invest in NPS?
NPS is (one of the) national pension schemes for NRI in India. On the face of it, it looks like a good product where you can invest as much as you want and can also decide on the allocation across asset classes. It also gives tax benefits and as an NRI, you can invest in it, unlike many other investment schemes.
But it is not the most efficient product – there are still many unresolved issues. Plus, the annuity market is at a very nascent stage in India & we are not a big fan of the annuity.
If the NRI falls in the higher tax slabs, he has to pay 20% or 30% of tax on it. This is much more than the LTCG to be paid. It is illiquid as you cannot withdraw easily.
In case if your citizenship changes NRIs will have to close the account. There are not many details on rules regarding this kind of closure. (UPDATE – OCI can open or continue NPS)
If you are young, you are not sure where you will be living post-retirement, it does not make much sense.
If you are plRetirement Planning Service for NRIs
If you have any questions on NPS In India – feel free to add them in the comment section. Also, share your experiences while opening or managing an NPS account in India – online or offline.
Published onJanuary 27, 2022
Hemant Beniwal
Hemant Beniwal is a CERTIFIED FINANCIAL PLANNER and his Company Ark Primary Advisors Pvt Ltd is registered as an Investment Adviser with SEBI. Hemant is also a member of the Financial Planning Association, U.S.A and registered as a life planner with Kinder Institute of Life Planning, U.S.A. He started his Financial Planning Practice in 2009 & is among the first generation of financial planners in India. He also authored Bestseller book "Financial Life Planning".
What is the returns expected in NPS for NRI?
Hii
Gaurav
it depends on you which asset allocation you are taking.
how do I change the status of NPS applicant from NRI to Resident Indian?
Hi Udaya,
There is no required procedure for NPS to update your tax status from NRI to resident Indian. However, on becoming a resident Indian, you must inform your bank (that you have linked with your NPS account) about your change of status within a reasonable time.
What is the maximum amount I can deposit in NPS account per annum
Hi Jay,
There is currently no NPS contribution limit on the number of contributions or the amount of investment an investor can make in an NPS account
Is the amount taxed for NRIs.and the amount to repatriated to other country
Hii Jafu
The annuity received from NPS is taxable.
Withdrawal up to 40% of the accumulated wealth in NPS is exempt from tax at the time of retirement.
I am an NRI aged 63 and having funds in NRE account. I want to invest in NPS and would like to have interest either quarterly or half yearly. What is the scheme and yield
Hii Ramalingam,
NPS is product which provides you monthly pension during retirement based on the corpus you have accumulated in the scheme so far.
Can u tell me the full details of nps scheme
It’s a product for retirement saving and also provide tax benefit. Help you in building corpus to get income post retirement.
What happens to NPS account if Resident Indian becomes NRI? Can he continue to contribute?
Hi Gourav,
NRI can continue that account – status will be changed.
Can you explain National pension scheme
Its’s a government scheme for retirement purpose.
NRI can invest through his NRE account in NPS
Dear Jiya
Yes you can invest in NPS through NRE Account
What nationality I should provide in NRI NPS form ?
Hi Arjun,
You need to mention Indian nationality.
Can OCI holders and citizens of USA invest in NPS?
Hi Niten,
Yes , but Teir-II account is not available for OCI holders.
I want to open a non reptariable NPS account
Hii Subramaniv
Yes you can open, visit the nps website
If I open NPS Tier 2 account as an NRI today and get some funds into the account can I withdraw full amount from it immediately.
Hi Harish,
As per my knowledge no you cannot withdraw the amount immediately.
I WANT TO OPEN NPS
Hi Prasath,
You can open an NPS account by visit the NSDL site.
NPS IS GOVERNMENT
Hi Shakti,
Yes but market linked
As NRI can we open PPF account?
Hi Akash,
No, NRI can not open a new ppf account.
What are the benefits of opening an NPS account and are there any returns monthly or quarterly on the amount invested
Hi Sameer,
It is a pure retirement product. In the product you have a option to choose the pension funds. There is no gurantee returns on it.
Do NRIs have to pay taxes?
Hi Vignesh,
Yes.
how can I join NPS?
Dear Pokkakkillath,
If you have a pan card and a bank account you can open an NPS account online through NSDL.
I want to understand what is annuity investment.
Hi Prateek,
in an annuity investment plan You will receive a fixed amount every month.
I have a savings account in sbi india, but not NRE account working in uganda. Can i open & invest in NPS with the savings acc i have in sbi or NRE acc in mandatory fr it. Please reply.
Hi Sandhu,
as per my knowledge
You can open your NPS account using any of the accounts but it would be advisable to change your residency status in your bank first.
If I am married to a foreigner can I still invest in NPS?
Hi Lamboi,
You can invest in NPS only if your status is resident or If you already have an NPS account then you can continue your contribution.
I am an NRI. I want to invest in NPS. What is the procedure?
Hi Mathew,
If you have a pan card and a bank account you can open an NPS account online through NSDL.
What is the best investment options in USD currency for NRI in Gulf ?
Hi D J,
You should consult with an Investment Advisor in Gulf for this.
I am 58 years old NRI going to retire at 60. Can I go for NPS and get pension from my retirement time. What is the current interest, profit from NPS?
Hi Syed,
As per my knowledge, it is not beneficial to start the NPS after 60 if you are retired.
could you please tell me what is the best investment plan for a person of the middle east tax-free country?
Hi Mahie,
Investment plan should be according to financial goals. You should consult with an Investment Advisor in middle east country regarding this.
As per rule NRIs can open Tier-1 account but not Tier 2 account. What happens to an existing Tier-2 account if someone’s status change to NRI?
Hi Sanjay,
In case you already have a Tier 2 account before becoming NRI, you cannot contribute further. You can exit also, as Tier 2 has no withdrawal restrictions.
How can an NRI OCI holder invest in stocks directly?
Hi Amin,
Yes, they can invest if they have the required accounts.
I feel it is not worthwhile investing in NPS as 40% amount is locked away in annuity. You only have access to 60% that too after the age of 60. There are better placed products in the market.
Thanks Avinash for sharing your views.
Can one continue for 3 more years from 60 and finish off at 63.?
Yes, you can.
Thanks, can it be curtailed to two years?
After the insertion of section 194IB in the finance act, 2017, there is a lot of confusion is arising in the differences between 194I and 194IB.
Hi Ankit,
u/s 194-I, an Individual or HUF is required to deduct TDS on Rent, if tax audit was applicable to him in the immediately preceding financial year. But u/s 194-IB no such criteria is applicable, i.e. those Individual or HUF will deduct TDS who are not subject to tax audit or other than those covered u/s 194-I.
Do NRIs in USA need to declare or pay taxes for their investment in NPS during their tax returns?
Hi Sukhant,
Reporting in US is complex – I will suggest having a word with CPA.
What is the procedure for converting NRE account to RNOR
Hi,
Contact your bank.
how much monthly one can invest, which is best plan to investment
Dear Ritesh,
I will you to check this https://www.wisenri.com/nri-investment-options-in-india/
NRI can invest in NPS but what about Foreign citizen of Indian origin, who have taken foreign passport. They are not classified as NRI, can they invest? Any reliable link or source whether PIO can invest in NPS or not?
Hi Naren,
If you have OCI card you can invest in NPS but my question is why you want to do that?Possible if someone wants to retire in India
Yup 🙂
