National Pension Scheme for NRI

Retirement planning can be tough for Non-Resident Indians. The National Pension Scheme aims to provide social security, but understanding eligibility, process, investment options, and withdrawal rules across borders is confusing. This comprehensive guide explains the NPS scheme for NRI in simple terms. It will cover who is eligible for an NPS account, how the application process works for overseas Indians, the retirement corpus investment funds available, and the withdrawal rules.

What is NPS for NRI?

The NPS is a retirement plan. It provides social security and funds to citizens, including NRIs, during old age. The NPS offers global portability, allowing NRIs to continue saving for retirement regardless of where they reside. It provides various options to save systematically towards accumulating a retirement corpus. By offering tax benefits, flexible investment choices, and options to receive regular pensions after 60 years of age, the national pension scheme for NRI intends to provide robust social security, especially to NRIs living abroad. Understanding the NPS allows NRIs to utilise it fully to secure their non-earning years.

Eligibility Criteria for NPS for the NRI

Here are the eligibility criteria for national pension scheme for NRI:

• Citizenship: Must be an Indian passport holder. Both NRIs working temporarily abroad and Overseas Citizens of India are eligible.
• Age limit: Must be between 18 and 65 years of age when opening an NPS account.
• Spousal accounts: An NRI's spouse can also open an NPS account if they comply with the age criteria.
• KYC compliance: Fulfilling KYC norms is vital for opening an NPS account as an NRI. This involves the submission of officially recognised identification and address proof documents as per due process.
• PAN card: PAN card is compulsory for opening an NRI NPS account.

Benefits of NPS for NRI Account

1. Global Portability

One of the biggest advantages of the national pension scheme for NRI is the feature of global portability. This allows seamless transfer of the accumulated pension wealth without any tax implications if there is a change in the country of residence. Whether moving for work or returning to India, there is continuity in accruing retirement benefits to the NPS scheme regardless of location or circumstances.

2. Tax Saving on Contributions

Contributions to the NPS retirement account enjoy tax-saving benefits under Section 80CCD up to Rs. 1.5 lakhs in a financial year. This limit is over and above the Section 80C deduction cap of Rs. 1.5 lakhs per annum. The tax break on yearly contributions helps NRIs significantly reduce their taxable income and saves tax.

3. Completely Tax-Exempt Maturity Corpus

The entire accumulated pension corpus on maturity and any partial withdrawals made after age 58 years are tax-exempt in the hands of NRIs as per existing rules. This allows maximising returns for the corpus targeted towards retirement.

4. Professionally Managed Investments

With NPS, your pension stash gets handled by pro-investment managers so that you can relax. Based on whether you like to play safe or don't mind some smart risks for higher rewards, they will invest the lumpsum across well-performing assets like bonds, shares, securities etc. 

5. Regular Annuity Income Option

On retirement, NRIs can use the maturity corpus to purchase annuities that can provide fixed monthly or quarterly pension payouts to sustain regular income needs.

How do you invest in an NRI Pension Scheme?

I. Select a POP: Choose a Point of Presence (POP) service provider from approved banks or entities facilitating NPS applications for overseas Indians.
II. Complete KYC: Furnish necessary Know Your Customer documents for identity and address verification and passport copies as per requirements.
III. Get Application Form: Access the specific NPS account opening form for NRIs from the POP's web portal.
IV. Fill Details: Provide basic personal and contact information in the form. Also, select the preferred investment asset mix from available fund options.
V. Transfer Funds: To activate the account, transfer the initial contribution funds to the provided account number from a designated overseas or NRO bank account.
VI. Receive Account Details: Successfully opening an NPS account as an NRI will provide access details to start monitoring and managing the retirement savings portfolio.

Details of National Pension Scheme for NRI

NRIs can apply for an NPS account online either through select banks appointed as Points of Presence (POP) or other approved intermediaries providing this facility. The minimum initial contribution is set at ₹500, with subsequent contributions allowed at or above ₹250 through convenient payment methods. Each account holder gets issued a unique Permanent Retirement Account Number (PRAN) for seamless record keeping and individual account access.

A key feature of the NPS is providing subscribers a choice to invest their pension corpus across asset classes as per personal risk preferences and retirement needs. Professional PFRDA-registered fund managers handle the investment decisions and wealth creation from contributions received.

On attaining 60 years, up to 60% of the accumulated balance can be withdrawn as a tax-free lump sum payment to the NRI subscriber. The purchase of annuities providing fixed pensions from the remaining corpus through insurance company tie-ups is mandated by regulations.

Withdrawals From NPS for NRI

The NPS follows defined withdrawal guidelines for accessing the accumulated pension corpus as per PFRDA regulations. NRIs can start withdrawing funds after meeting the minimum age criterion.

As per existing rules, partial withdrawal of up to 25% of own contributions is allowed only to meet defined expenses related to higher education or children's marriage. Additionally, NRIs qualify for premature exit before the retirement age of 60 to utilise up to 20% of the pension wealth in emergencies.

On crossing 60 years of age, a maximum of 60% of the total corpus can be taken as a lump sum tax-exempt payment by the NRI subscriber as per choice. The remaining minimum of 40% has to be utilised to purchase approved annuity schemes offered by life insurers to generate guaranteed pension. Annuity purchase ensures regular income flow during retirement years.

Understanding NRI Premature Exit

Premature exit refers to the withdrawal of accumulated pension wealth by an NRI subscriber before the retirement age of 60 years stipulated as per NPS policy. Up to 20% of the corpus can only be withdrawn as a special case provision to meet defined financial emergencies. However, the premature withdrawal amount can only be credited to the NRI's NRO account. 

The Bottom Line

Summarising key aspects from eligibility criteria to withdrawal rules, this guide aims to empower NRIs to understand the National Pension Scheme better to utilise it for retirement planning. Starting contributions early, with disciplined savings into a tailored, growing pension corpus, can effectively secure financial needs later in life.