Can NRIs open NPS Accounts?

5 MinsSep 21, 2022

Whether you are an Indian citizen or a Non-Resident Indian living abroad, retirement planning is a key financial goal. The National Pension System (NPS) is a government initiative that can help you plan your income for your retirement.

Can NRIs open NPS Accounts

NPS is a retirement savings scheme that the Government of India launched in 2004. When you open an NPS account, you must make regular contributions. These contributions are invested in market instruments to give you market-linked returns. When you open an NPS account, you ensure that your retirement years are financially secured. NPS account is a cost-effective and tax-efficient scheme that helps you plan for retirement. The amount of money you invest in your NPS account becomes the basis on which you earn returns.

Who can open an NPS Account?
Anyone who is an Indian citizen between the age of 18 and 60 years can open an NPS account. This includes NRIs. As long as you hold a valid Indian passport and are an Indian citizen, you can open an NPS account. However, NRIs can open only Tier I NPS accounts. The voluntary Tier II NPS account is not available for NRIs.

Difference between Tier I and Tier II NPS Account 
NPS Tier I account is a mandatory account. When investing in NPS, your initial contribution must be made to the Tier I account. This account requires a minimum contribution of Rs. 500 per transaction and a minimum of Rs. 1000 yearly. Contributions to the Tier I account are also eligible for tax benefits under Section 80C of the Income Tax Act.
Tier II accounts are voluntary accounts. To open a Tier II NPS account, you must invest in a Tier I account. The minimum amount per contribution to a Tier II account is Rs. 250, however, no minimum balance is required to be maintained. While you can withdraw from the Tier II account without any restrictions, it is not eligible for tax benefits and the amount that you withdraw is taxable. NRIs are not eligible to open Tier II accounts.

[Also Read: Five smart investment avenues to plan your retirement]

NPS Account Eligibility 

To open an NPS account, you must meet the following eligibility criteria:
1. You should be a citizen of India
2. Your age should be between 18 years and 60 years
3. You should have a valid bank account. For NRIs, this can be in the form of a Non-Resident External Account or a Non-Resident Ordinary Account
4. You should comply with all the KYC requirements
5. You should have a valid PAN card

Benefits of an NPS Account 

1. NPS investments allow you to make arrangements for regular income for your retirement.
2. Investing in an NPS account is a simple procedure. You can do it online
3. You have the option of investing in both debt and equity instruments. You can decide the proportion based on your age. This ensures stable returns as well as the potential to earn higher returns
4. There is a range of pension funds to choose from. You can shift between funds without any hassle.
5. It is easily portable across locations and jobs.
6. NPS is well-regulated by the PFRDA.

The process of applying for an NPS Account

NRIs may find it easy to opt for the online process of applying for an NPS account. You can do it directly on the NPS website or through any commercial or public bank that allows NRIs to open an NPS account online.
1. Visit the official axis bank website and choose the ‘Individual Subscriber’ option
2. It will ask for your residential status – choose NRI
3. Select the Tier I NPS account option
4. Enter your PAN or Aadhaar details
5. Choose your Point of Presence service provider. They will also help you complete your KYC
6. The website will ask you to upload copies of certain documents such as your PAN/ Aadhaar card, a cancelled cheque of a valid bank account, a photo and signature
7. Confirm whether your bank account is repatriable or non-repatriable
8. Enter details of your NRE Account or NRO bank account
9. Enter your communication address details. This can be your permanent address in India or an overseas address.
10. Make the required payment for opening your NPS account
11. After you have made the payment, you will get your Permanent Retirement Account Number (PRAN)
12. After you receive your PRAN, you will need to complete authentication. There are two ways to do this:
i) You can do it online using the e-sign option
ii) You can print the details and send them to the bank where you have your NRI account

Things to Keep in Mind

1. As an NRI, your NPS account will be valid only till you remain an Indian citizen. If you cease to be an Indian citizen, your account will automatically close.
2. You can choose between two modes of investment – Active and Auto. Under the Active Mode, you can choose how you want to invest your funds. Under the Auto Mode, you simply have to choose your risk profile, and the allocation will be made automatically for you.
3. You must appoint nominees for your pension account. You can choose up to three nominees.
4. You have to make a minimum of Rs. 500 per contribution and maintain a Rs. 1,000 yearly balance in your NPS account.
5. There is no maximum limit.
6. You cannot withdraw from your pension account until three years of investment. After that, you can withdraw partially in case of emergencies such as paying for a medical requirement, or other specific financial needs like your child’s education or building a house.

As an NRI, you can open an NPS account as long as you meet all the NPS account eligibility requirements. Opening an NPS account makes it easy for you to plan your retirement. However, you can only open a Tier I NPS account and keep it active until you are an Indian citizen.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.