NRIs can now invest in the National Pension Scheme to provide them security of income when they return and retire in India. Recently RBI allowed NRIs to subscribe to National Pension Scheme (NPS) that is easily accessible, low cost, tax efficient, flexible and portable retirement savings account. This scheme is governed by Pension Fund Regulatory and development authority. RBI as consultation from the government is going all the way to appease NRI through this scheme and rope them to invest in India.
As per the RBI the investment in this scheme is routed through normal banking channels and the subscription amount is to be paid by NRI either by inward remittance or out of the funds held in their NRE/FCNR/NRO account and there will be no restriction on repatriation of the annuity or accumulated savings.
Eligibility Criteria:
- Any NRI between the age of 18 and 60 years
- This scheme is not valid for the person of Indian origin and overseas Citizenship of India.
- In case the subscriber’s citizenship status changes, his/her NPS account would be closed.
- Investment in NPS is independent of other contribution to any Provident fund.
Source and Minimum contribution to the scheme:
- Minimum contribution at the time of opening the account is Rs. 500/-
- Per year minimum contribution is Rs. 6000/-
- There are no limits for maximum contribution
Following documents are required to be presented:
- Filled subscriber registration form
- Copy of passport
- In case local address is different from the address on passport, proof of address is required to be produced.
Key features:
- Every individual subscriber is issued a Permanent Retirement Account Number (PRAN) card which has a 12 digit unique number.
- Under the scheme, individual has 2 options in terms of accounts- Tier – I and Tier – II. Tier I is mandatory account which will be provided to every subscriber. Tier II account is a voluntary savings facility and is optional and is made available as an add to Tier I account.
Just as entry rules NRI has to follow certain rules regarding partial withdrawal and exit:
- Partial withdrawal is allowed for up to 25 percent of the contributions for those who have subscribed to the scheme for at least 10 years.
- Higher education, marriage of children, purchase of construction of residential flat and treatment of specified illness are the only grounds on which partial withdrawal is allowed
- Premature exit is allowed only after completion of minimum 10 years with the scheme.
Benefits of NRI to invest in NPS:
1. It is best for NRI, who wish to return and retire in India
2. Financial advisors are of the view that the product is not only cost effective but also well regulated.
3. It has the history of delivering 8-10 percent returns over last 10 years
4. As NPS is the combination of debt and equity, it can be considered as a part of one’s portfolio but should not be seen as only retirement product one should possess
5. One should be well aware of foreign exchange risk factor when it comes to withdrawing amount invested in India.
6. Investing in NPS has become progressively attractive to NRIs, who are getting lured to this policy.