The National Pension Scheme (NPS) is a voluntary contribution pension scheme designed for employees from public, private, or unorganised sectors. Under this plan, the amount should be invested at regular intervals during employment, some percentage of which can be taken out after retirement. The remaining amount from the corpus can be received after retirement, just like the monthly pension amount. The individual who invests in the National Pension Scheme is known as a “Subscriber”. Every subscriber has to get an account opened with the Central Recordkeeping Agency (CRA), further getting the identification completed with the help of a unique Permanent Retirement Account Number (PRAN). NPS is a flexible, hassle-free & safe investment plan that allows one to secure a financial future in a planned manner. The subscriber can be a citizen of India, whether they are resident or not. This indicates that the non-residents can also apply for the National Pension Scheme (NPS) as their Pension Plan.
How to Register for the National Pension Scheme as an NRI?
Provided are the two ways to register for NPS by an NRI:
- Online Mode
- Visit the official website of eNPS & click the tab “Registration”.
- Choose the status as “Non-Resident India”.
- Then choose the account type as “Repatriable” or “Non-Repatriable”.
- To register, enter your Permanent Account Number, bank details, passport number, & country of residence.
- Fill out all the details required along with the scanned copies of the PAN card, cancelled cheque, signature, passport, photograph, etc.
- In case of a Tier-I account, pay a minimum of INR 500 through online mode.
- In case of a Tier-II account, pay a minimum of INR 500 with the help of a debit card or internet banking.
- Take a printout of the duly filled-in form & sign it.
- Send the same to the Central Recordkeeping Agency (CRA) within 90 days, so as not to get the account frozen.
- Offline Mode
- Visit any nearest bank branch that has been registered under the National Pension Scheme as the Point of Presence (POP).
- Get an application form to register for NPS by an NRI.
- Fill out the application form with the required details, including photograph, signature, address proof, PAN Card, cancelled cheque, & passport.
- Submit the duly filled-in form with a minimum contribution of INR 500 in case of Tier-I & INR 1000 in case of Tier-II to your respective POP.
- The documents would be verified by your respective POP, & a Permanent Retirement Account Number (PRAN), along with a welcome kit, would be issued.
Eligibility Criteria
Provided are the eligibility parameters to be met to apply for NPS by an NRI:
- The minimum age of an NRI should be 18 years.
- The maximum age of an NRI should be 60 years.
- NRI should have a bank account, which may be a Non-Resident Ordinary (NRO) Account, i.e. non-repatriable or Non-Resident External (NRE) Account, i.e. repatriable.
- NRIs should carry a valid PAN Card with a valid PAN number.
- NRIs are required to meet the compliance KYC norms to get an NPS account opened by an NRI.
- NRIs can open a Tier-I NPS account only.
Snapshot of NPS for an NRI
Provided are the details of the NPS pension plan in case of an NRI:
- This scheme exists till the time an individual remains an Indian citizen, where it gets closed immediately the citizenship status changes.
- The Pension Fund Regulatory & Development Authority (PFRDA) appoints seven pension fund managers, from which an NRI is required to choose one. The pension fund manager can be changed over the investment period.
- Choose an investment mode amongst the two, i.e. active & auto. If the “Active” mode has been chosen, mention the funds in which investment is to be made, along with the percentage of allocation. If the “Auto” mode has been chosen, select the appropriate risk profile to allocate the funds accordingly.
- Choose your nominees, up to a maximum of 3, who will be entitled to receive the fund value in case of your sudden demise.
- There is no maximum limit on the amount of investment.
- The minimum contribution amount to open a Tier-I NPS account for an NRI is INR 500 to keep the account active. Additionally, a minimum investment of INR 6000 would also be required every year till the time this scheme matures to keep it active.
Taxation Benefits
The tax benefits under the NPS Savings Plan for an NRI are provided below:
- This plan allows a deduction of tax on the amount invested in the scheme, a maximum of INR 1.5 lakhs u/s 80CCD(1), which includes a deduction u/s 80C also.
- An additional deduction of INR 50,000 can be availed u/s 80CCD(1B) on the amount invested in the scheme.
- The lump sum amount allowed to be withdrawn is a maximum of 60% 60%of the corpus, which is known as commutation. The commuted value of the pension is exempt from tax.
- Hence, the NRIs are allowed to maintain their retirement funds with tax benefits.
- The remaining 40% of the retirement corpus is paid as a pension in different modes.
Withdrawal Rules
The withdrawal rules of the NPS savings plan are as follows:
- Upon attaining the age of 60
- It allows one to withdraw 60% of the retirement corpus as a lump sum amount, totally exempt from tax.
- The remaining 40% can be used to buy an annuity from a service provider duly approved by PFRDA, which allows receipt of a regular stream of income throughout your life.
- There is no need to buy an annuity to withdraw the entire corpus amount, which falls below INR 2 lakhs.
- Before the age of 60
- It allows for an exit from the scheme once a period of 10 years has been completed of making contributions.
- It allows you to withdraw 20% of the funds in one lump sum.
- The remaining 80% can be used to buy an annuity.
- There is no need to buy an annuity to withdraw the entire corpus amount, which falls below INR 2 lakhs.
Conclusion
National Pension Scheme is the wisest choice for an individual seeking low-cost, flexible, & reliable retirement options. One can build a considerable corpus amount for retirement, along with tax benefits.
