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Tata Capital > Blog > Wealth Services > NPS For NRI

Wealth Services

NPS For NRI

NPS For NRI

NPS, short for National Pension Scheme, is a voluntary, defined contribution retirement plan available to all Indian citizens, including Non-Resident Indians (NRIs). It helps individuals save regularly during their working years to ensure a steady income after retirement. Here’s an overview of how NPS works for NRIs, covering its key features, eligibility, and registration process.

Types of NPS Accounts for NRIs

There are two types of NPS accounts in India-

Tier I Account – This is the main account for NPS, where contributions are made regularly. The funds in this account are locked in until the account holder reaches the age of 60.

Tier II Account- NRIs are not allowed to open a Tier II account.

To contribute to an NPS account, NRIs must have an NRE or NRO account. Here are the contribution guidelines-

  • The minimum sum needed to open an NPS account is INR 500.
  • Each contribution transaction must be at least INR 500.
  • The total annual contribution must be no less than INR 6,000.

Key Features of NPS for NRIs

The NPS account for NRIs has several unique features.

– It offers a well-diversified investment portfolio that includes equities, corporate bonds, and government securities. This helps spread the risk and safeguard your investment during market volatility.

– Subscribers can choose between Active Choice and Auto Choice. In Active Choice, the NRI investor selects the asset classes and their investment ratios. In Auto Choice, the investment is managed on behalf of the NRI investor based on their age.

Eligibility Criteria for NPS for NRIs

To be eligible for NPS, NRIs must

  • Be between 18 and 60 years of age.
  • Comply with KYC norms.

Note that Persons of Indian Origin (PIO) and Overseas Citizens of India (OCI) are not eligible to invest in NPS. Additionally, an NRI’s NPS account will be discontinued if they cease to be an Indian citizen.

Benefits of NPS for NRIs

Here are the following benefits that NPS accounts offer to NRIs.

1. Maturity benefits

NRIs can contribute to their NPS account until the age of 60 and may defer lump sum withdrawal until 70. Upon maturity, 60% of the accumulated amount is paid as a lump sum and transferred to the NRE or NRO account. The other 40% is used to purchase an annuity, providing regular pension income.

2. Tax benefits

Contributions made to NPS are eligible for tax deductions of up to Rs 1.5 lakh under Section 80C of the Income Tax Act. Additionally, NRIs can claim an extra Rs 50,000 under Section 80CCD(1B). The 40% used to purchase the annuity is also tax-free.

3. Close monitoring

NPS accounts for NRIs are carefully managed with remote monitoring and secure processes. The Pension Fund Regulatory and Development Authority (PFRDA) oversees the fund’s performance and resolves any potential concerns.

The NPS provides NRIs with a reliable way to secure retirement income. By contributing regularly and taking advantage of tax benefits, NRIs can ensure financial stability after retirement. Explore tailored investment opportunities for NRIs with Tata Capital Wealth to grow your wealth and achieve financial stability. Visit our website today!

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