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Foreign investors (NRI/OCI) in NPS experience certain differences from domestic investors
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NRIs need to meet the minimum contribution of Rs. 500 required thereafter, a minimum investment of Rs 6000 would be needed every year in order to keep the account active, which for domestic subscribers is Rs 1000
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There is no upper limit for NRIs to invest in NPS. The accumulated corpus in NPS is repatriable for NRIs/OCIs, allowing funds to be transferred abroad, while domestic investors do not have this option
The benefits of the National Pension System (NPS) can be availed by Non-resident Indians (NRIs) and Overseas Citizens of India (OCIs) who can also open NPS accounts and invest their money into the growing Indian capital markets while working abroad, reported financialexpress.com.
Senthil G, Chief Business Development Officer, KFintech, said that NPS was a retirement savings scheme introduced by the Indian Government and regulated by the PFRDA. It empowered individuals to contribute to their own pension accounts, fostering a sense of control and financial security. “With NPS, you can choose from various pension investment options tailored to your preferences and risk appetite. This allows you to shape your retirement savings strategy in a way that aligns with your unique goals and aspirations,” he was quoted saying.
Foreign investors (NRI/OCI) in NPS experience certain differences from domestic investors. Senthil G said NRIs need to meet the minimum contribution of Rs. 500 required thereafter, a minimum investment of Rs 6000 would be needed every year in order to keep the account active, which for domestic subscribers is Rs 1000. However, there is no upper limit for NRIs to invest in NPS. The accumulated corpus in NPS is repatriable for NRIs/OCIs, allowing funds to be transferred abroad, while domestic investors do not have this option.
Kurian Jose, CEO of Tata Pension, said NRIs are permitted to open accounts with banks on a repatriable and non-repatriable basis. They can invest in NPS using their non-resident external (NRE) and non-resident ordinary (NRO) bank accounts.
As far as regulations go with respect to PFRDA, there are no separate regulations that distinguish the resident Indian from NRIs and OCIs, apart from currency exchange norms. Also, NRIs cannot invest in Tier 2 accounts of NPS.
NRIs have to contribute from their respective NRE/NRO accounts only and all the redemptions/withdrawals will get credited in the local currency (INR) in the NRO Account.
The tax benefits are the same as domestic subscribers. NRIs can get tax benefits from sections 80C and 80CCD1B of the Indian Income Tax Act. Foreign investors can claim tax deductions up to INR 1,50,000 as deductibles u/s 80C of the Income Tax (IT) Act. This amount is contingent on no other investments being declared under this section of the IT Act. They can further claim a tax deduction of INR 50, 000 u/s 80CCD 1(B) annually on their NPS investment, according to Senthil G.
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The withdrawal proceeds for NRIs will get credited in local currency only in INR and in the NRO Account
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The entire investment and withdrawal process can be done fully online for NRIs using Aadhaar OTP. Offline process is also available through Point of Presence (POP)
Any NRI of age between 18 to 70 can get a Permanent Retirement Account Number (PRAN) and thus start the NPS journey. Documents required would be his/her Aadhar number linked to mobile number, copy of signature, cancelled cheque or PAN details and his Passport.
NRIs/OCIs can start their NPS investment with a minimum amount of Rs 500 to generate the PRAN Number.
On maturity, NRIs will need to purchase mandatory annuities in India. Withdrawal for the 60% can be credited in INR in NRO which can be subsequently repatriated to any currency. “Withdrawal rules differ for NRIs/OCIs, upon superannuation or maturity, NRIs can withdraw up to 60% of the corpus generated without any tax liability, whereas the remaining 40% of the corpus needs to be mandatorily invested in an annuity plan of an ASP based on investor’s choice and tax treatment of annuity payments depends on the DTAA of the country of residence,” said Senthil G.
According to Senthil G, the Tier I NPS account does not allow easy withdrawals before maturity. However, an NRI can withdraw partially for specific financial needs like meeting education costs, paying for medical expenses, buying a house, etc. Partial withdrawals are allowed after three years of investment initially and after a gap of 5 years each. They can withdraw up to 25% of the invested amount at one time, and the maximum number of times that they can apply for partial withdrawal is 3 in a lifetime.
The withdrawal proceeds for NRIs will get credited in local currency only in INR and in the NRO Account. The entire investment and withdrawal process can be done fully online for NRIs using Aadhaar OTP. Offline process is also available through Point of Presence (POP).
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