How Can NRI Invest in NPS ? – Recently RBI opens gate of National Pension System (NPS) for NRI’s. NPS is the now an investment option for non-resident Indians as well.
As per the Pension Fund Regulatory and Development Authority (PFRDA) guidelines NPS is a contributing pension plan up to age of 60 years with minimum contribution of Rs.6,000 in Tier I account where as there is no maximum limit.
There are various POP who will invest the amount on your behalf to various market-linked funds currently on offer—government securities fund, fixed-income instruments other than government securities fund and equity fund. It is also made mandatory that the maximum equity exposure should be 50% and only through the index funds.
After attaining age of 60 years you would be having option to redeemed the 60% of this money and buy an annuity product, it offers pension, with the rest.
In case of NPS withdrawal before the age of 60 years , you will have to use 80% of the accumulated corpus to buy an annuity. You may also be given choice for partial withdrawal up to 25% of the contributions after 10 years of being in the scheme for specific purposes.
While the Tier I account is basic, the Tier-II account works like a savings account to offer liquidity.
How to invest in NPS ?
- An NRI can invest in NPS through a rupee denominated non-resident (external) rupee (NRE) account or non-resident ordinary rupee (NRO) account or local sources.
- Money can be transfer through any bank in India as almost all banks in India work as distributors (called “points of presence” or PoP) for NPS,
- NRI may approach any of the bank to open an NPS account.
- NRI needs to fill the registration form and submit a copy of passport and proof of address in India in case the local address is different from the address in passport.
- After verification NPS account will be opened.
After opening of account PFRDA card or PRAN card , permanent retirement account number will be handed over to you.
NPS investment charges are 0.01% currently.
- Investment in NPS account provide tax benefit as per various section of Income Tax. Contributions to NPS qualify for a tax deduction under Section 80CCD of the Income-tax Act, 1961; 10% of the salary (or total income) contributed to NPS is eligible for a tax deduction up to Rs.1.5 lakh.
- Additional deduction of Rs.50,000, in tier II account is also exempted. Annuities and 60% that you can keep on maturity is taxable.
- NPS is useful for such NRI who are intended to return India after the retirement.