Latest National Pension Scheme for NRIs

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.

What are the Documents that need to be submitted along with the Withdrawal forms of NPS

NPS scheme offers two options to the investors – Tier I the investor cannot withdraw the amount of investment and this can be withdrawn on maturity i.e. 60 yrs. Tier II the investor can withdraw the amount any time by submitting certain documents.

The type and nature of documents to be submitted depends on the nature and the need of withdrawal. The withdrawals can be categorized in two broad categories:

1. NPS subscribers over 60 yrs of age and non government employee:

• PRAN card in original and in case the PRAN card is not available the subscriber needs to submit an Affidavit duly notified as the reasons why PRAN is not submitted.
• Evidence of birth date, age of evidence of the subscriber for purchase of annuity (Ex matriculation certificate or another educational qualification certificate clearly indicating date of birth.
• Identity proof and address to confirm with AML guidelines of the government
• Cancelled Cheque (containing the name of the subscriber, bank account number and IFSC code) or Bank certificate containing name, bank account number and IFSC code for direct credit or electronic transfer.
  2. NPS subscribers before attaining 60 yrs and other than government employees:
• Original copy of PRAN card and in case this is not available, the subscriber needs to submit an Affidavit duly notarized as to the reasons of non submission of the card.
• Cancelled Cheque (Containing subscriber name, Bank account number and IFSC code or Bank certificate containing name, bank account number and IFSC code for direct credit and electronic transfer.
• Proof of birth date or age of evidence of the subscriber for purchase of annuity i.e. tenth board exams certificate or any other board exam certificate stating the date of birth.
• Proof of identity and address to confirm with AML norms of the government.
  In case of death of subscriber additional document of death certificate in original and legal heir certificate or succession certificate issued by competent authority to be submitted.Withdrawal application forms for NPS:
• Government sector: Form 101, Form 102 and Form 103 and Form 401
• Subscriber under all citizen model: Form 301, Form 302 and Form 303
• Subscriber falling under Swavalamban scheme: Form 501 SS, Form 502 SP and Form 503 SD