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Non-Resident Indians (NRIs) living in the UAE have the opportunity to open a National Pension System (NPS) account in India. This is a great financial opportunity for NRIs, as it provides them with a retirement savings option with a host of benefits including tax savings, flexibility, and the potential for higher returns.
The NPS is a government-sponsored pension plan established in 2004 by the Government of India. It is governed by the Pension Fund Regulatory and Development Authority (PFRDA) and is accessible to all Indian citizens including NRIs. The primary objective of NPS for NRI is to provide a secure and long-term solution for retirement income to its subscribers.
Opening NPS for NRI is a simple and quick process. In the article below, we will understand the intricacies of the national pension scheme for NRI and comprehensively cover the involved process, which can help you easily make retirement savings.
Non-Resident Indians (NRIs) are individuals who are Indian citizens but live outside India. NRIs in the UAE are Indian citizens who have chosen to live and work in the UAE for multiple employment opportunities and reasons like high salaries or better quality of life. NRIs in the UAE can take advantage of various Indian schemes, with NPS being one among them.
While NRIs are eligible to open an NPS account and invest in the scheme, it is essential to note that Persons of Indian Origin (PIO) are not permitted to invest in NPS. PIOs are foreign citizens of Indian origin who have roots in India. Despite their Indian ancestry, these individuals are not classified as Indian citizens and, as such, do not have the same rights and privileges as NRIs. In addition, Hindu Undivided Families (HUFs) do not qualify for the NPS scheme.
NPS for NRIs are available in two types of accounts - Tier I and Tier II accounts.
Under NPS, tier 1 is the primary account and is mandatory for all subscribers. NRIs must contribute a minimum of INR 500 at the time of opening the account and make a minimum annual contribution of INR 1,000.
The tier I account is designed as a long-term retirement savings scheme, and the funds invested in the account cannot be withdrawn until the subscriber reaches the age of 60 years. However, in certain cases, such as permanent disability, critical illness, or death, partial withdrawal is allowed.
As a rule, after retirement, NPS subscribers can withdraw a maximum of 60% of the accumulated corpus, while the remaining 40% of the corpus must be used to purchase annuities. This will ensure a steady monthly income in the form of a pension.
An optional account, investors can open a Tier II account only if they have an active Tier I account. This account does not have any withdrawal restrictions, meaning that subscribers can withdraw funds from their accounts at any time.
The minimum contribution to open the account is INR 1,000, and there is no minimum annual contribution requirement. However, it is important to note that tier–II accounts are solely for residents in India and are not available for NRIs.
Check out the table below for a better understanding of NPS for NRIs and the differences between the two types of accounts:
|Features||NPS Tier I Account for NRI||NPS Tier II Account for NRI|
|Account type||Mandatory retirement savings account||Voluntary savings account|
|Minimum contribution||INR 500 at the time of opening the account||INR 1,000 at the time of opening the account|
|Minimum annual contribution||INR 1,000||No minimum annual contribution required|
|Withdrawal restrictions||Funds cannot be withdrawn before the age of 60 years except in certain cases such as permanent disability, critical illness, or death||No withdrawal restrictions|
|Tax benefits||Contributions are eligible for tax deductions under Section 80CCD (1) and 80CCD(1B)||No tax benefits are available|
|Annuity purchase||40% of the corpus must be used to purchase annuities to secure regular monthly income in the form of a pension||Not applicable|
|Eligibility||Any Indian citizen (18-70 years)||NRIs and OCIs are not eligible|
NRIs in the UAE can benefit significantly from investing in the NPS. However, it is essential to qualify the eligibility criteria as listed below:
For Non-Resident Indians (NRIs) looking to open a National Pension Scheme (NPS) account, the following documents are generally required -
Important: The specific document requirements listed above may vary depending on the Point of Presence (POP) and your individual circumstances. Always consult with your chosen POP to ensure you have all the necessary documents before proceeding with the NPS account opening process.
NPS offers a myriad of advantages to NRIs such as –
Here is a step-by-step guide to opening an NPS for NRI-
Note: NPS account for NRIs is subject to regulatory changes and amendments. You can keep yourself updated on the latest guidelines and rules concerning NPS for NRIs by visiting the official PFRDA website or consulting with your chosen POP.
The address for CRA is as follows -
Central Recordkeeping Agency (eNPS)
NSDL e-Governance Infrastructure Limited,
1st Floor, Times Tower,
Kamala Mills Compound, Senapati Bapat Marg,
Lower Parel, Mumbai - 400 013
Many bank institutions offer NPS for NRIs in the UAE. Listed below are the prominent ones -
In addition to offering higher returns and flexible investment choices, NPS also provides tax-saving opportunities for subscribers. These tax advantages are available to both salaried and self-employed individuals, as discussed below:
As previously mentioned, when investing in the National Pension System (NPS), you have the flexibility to choose the Point of Presence (POP), Central Recordkeeping Agency (CRA), and Pension Fund according to your requirements. Additionally, you can select your preferred investment choice - either Active Choice or Auto Choice - based on your risk appetite and financial objectives.
Here is a more detailed explanation of the NPS investment choices for NRIs:
In this option, you can actively decide the allocation of your investments among different asset classes. The permissible allocation limits for each asset class are as follows:
In Auto Choice, the allocation of your investments among different asset classes is done automatically based on your age and a predefined life-cycle model. There are three life-cycle funds to choose from:
When you submit a completed application to the service provider (POP) or through the online platform, you will receive an Acknowledgement Number. This number can be used to track the application status online.
Within two weeks from the date of application receipt, you will also get an Account Opening Kit (if requested) at the provided correspondence address. The kit will include the PRAN Card and the necessary passwords for accessing the account.
You can withdraw or exit from NPS tier-I and tier–II accounts as per the conditions listed below:
As an NPS investor, you can take advantage of the following options -
In the unfortunate event of a subscriber's death, the nominee or legal heir can withdraw the entire accumulated corpus. The nominee or family members of the deceased subscriber can also purchase an annuity if they wish.
Withdrawal or exit from an NPS Tier-II Account is unrestricted and will be mandatorily closed upon the closure of the Tier-I Account.
Tabled below are the fees and charges associated with NPS for NRIs –
|Point of Presence (POP)|
|Initial contribution and subsequent transactions||0.5% of the contribution amount
|Non-financial transactions||INR 30|
|Contribution through eNPS or D-Remit||0.2% of the contribution
|Pension fund – Investment management fee||0.0467% - 0.09%|
|NPS trust – Reimbursement of expenses||0.005% per annum of assets managed|
Note: Refer to the PFRDA website for a complete list of NPS charges for NRIs.
Ans: The pension amount that you receive will be determined by several factors, including the total contributions made, the returns earned on those investments, and the portion of the corpus used to purchase an annuity plan from any of the Annuity Service Providers approved by the Pension Fund Regulatory and Development Authority (PFRDA).
Ans: You can access your NPS account through various methods -