National Pension Scheme for NRI

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.

Who are Non- Resident Indians (NRIs) in UAE?

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.

Types of NPS Accounts for NRIs

NPS for NRIs are available in two types of accounts - Tier I and Tier II accounts.

1. Tier I Account

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tier I account is designed as a long-term retirement savings scheme, and the funds invested in the account cannot be withdrawn until the subscriber reaches the age of 60 years.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.

2. Tier II Account

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

Eligibility Criteria of NPS for NRIs

NRIs in the UAE can benefit significantly from investing in the NPS. However, it is essential to qualify the eligibility criteria as listed below:

• Indian citizens (resident or non-resident) as well as Overseas Citizens of India (OCI) qualify for the same.
• You should be between 18 and 70 years.
• You must have either an active NRE or NRO account to contribute to the scheme.
• Must possess a valid PAN card
• Armed forces do not qualify for the NPS scheme
• The minimum amount required for opening an NPS account is INR 500.
• The minimum amount to be contributed annually to the scheme is INR 6,000 
• To open a Tier II account, you must have a Tier I account.

Documentation Required to Open NPS for NRIs

For Non-Resident Indians (NRIs) looking to open a National Pension Scheme (NPS) account, the following documents are generally required -

• NPS registration form
• Permanent Account Number (PAN) 
• Aadhar number
• Address proof like driving license, electricity bill, or another document
• Proof of NRI status like a copy of the visa
• Bank account details (NRE or NRO)
• Passport size photographs

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.

Features and Benefits of NPS for NRIs

NPS offers a myriad of advantages to NRIs such as –

• The NPS scheme is regulated by Pension Fund Regulatory and Development, established through an Act of Parliament, which ensures the safety and security of the investments of the subscribers.
• NPS for NRIs cannot be opened on behalf of a third person and, thus, is classified as an Individual Pension Account.
• NPS is known for being one of the most affordable pension plans globally, offering flexibility in choosing a Point of Presence (POP), Central Recordkeeping Agency (CRA), Pension Fund, and Asset Allocation. 
• Subscribers or investors can change asset allocation twice during the financial year.
• The scheme's portability allows subscribers to transfer their NPS accounts across different employers and locations, both domestically and internationally. 
• NPS is also tax-efficient, with tax incentives provided to subscribers under the Income Tax Act 1961.
• Optimal returns are achieved through market-linked returns based on the subscriber's investment choice. This indicates that the returns will generally be higher than non-market linked schemes.
• NPS maintains transparency by enabling subscribers to access their accounts online 24/7 and requiring public disclosures.
• The program permits a single transfer of the superannuation amount to the NPS without incurring any tax obligations.
• Upon the death of the subscriber or investor, the nominee shall be entitled to receive the entire invested amount at once.

Procedure to Open National Pension Scheme for NRI 

Here is a step-by-step guide to opening an NPS for NRI-

Opening NPS Account through the Website or POP

• Check the eligibility criteria stated above.
• Select a bank or a financial institution that is registered as a Point of Presence (POP) or an NPS Nodal Office to open an NPS account.
• The list of registered POPs can be found on the official website of the Pension Fund Regulatory and Development Authority (PFRDA).
• Fill out the NPS registration form (Form NRI) after downloading it from the PFRDA website or obtaining it from your chosen POP.
• Fill out the form with all the accurate and necessary details.
• Provide your PAN, NRE/NRO account details along with your valid passport and visa copies.
• Choose the investment scheme and pension fund manager of your preference.
• Submit the completed form along with the required documents to your POP or NPS Nodal Office.
• Complete the KYC (Know Your Customer) process, which will be conducted by the POP.
• After the submission of documents, the bank will verify them and forward them to the Central Record Keeping Agency (CRA).
• You will have to make an initial contribution to your NPS account. The minimum initial contribution for an NPS account, as mentioned above, is INR 500 for Tier-I and INR 1000 for Tier-II accounts.
• The contribution can be made via cheque or through an online fund transfer from your NRE/NRO account.
• Once your NPS account is opened, you will receive your PRAN (Permanent Retirement Account Number) and online credentials via email or SMS.
• You can use these credentials to access your NPS account online and monitor your investments.
• After the initial contribution, you can start making regular contributions to your NPS account.

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.

Opening NPS Account through eNPS

• Go to the official eNPS website.
• To register for the scheme and make contributions, click on ‘National Pension System’ on the right side of the page.
•  The registration process has three sub-steps - 
  • New Registration
  • Complete Pending Registration
  • OTP Authenticate/eSign/Print Registration Form
• Click on ‘New Registration’.
• Provide details like applicant type, applicant status, registration mode (online or offline with Aadhaar or PAN), and account type (Tier I or Tier II).
•  If you select PAN-based registration, you must choose a POP (Point of Presence) for KYC verification, which can be a bank or non-bank. The list of institutions is available on the website. 
• For Aadhaar-based verification, you can choose from Aadhaar, Virtual ID, or offline KYC verification modes.
• Click ‘Generate OTP’.
• You will be directed to a registration form where you must fill in the following - 
  • Contact information
  • Bank details
  • Nomination details and more
• You must complete the given steps before registration is finalised - 
  • Generate acknowledgement ID
  • Submit registration details
  • PRAN generated
  • OTP authentication/eSign/print and courier registration form
• Use net banking to make the initial contribution and pay the KYC fees. For Aadhaar card-based verification, you can use a credit or debit card for payment.
• If you cannot eSign, print the form, attach your photo, sign it, and submit the form to CRA.

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

List of NPS Service Providers

Many bank institutions offer NPS for NRIs in the UAE. Listed below are the prominent ones -

• UTI Government Solutions
• Bajaj Allianz life insurance
• Kotak Mahindra Pension Fund
• LIC Pension Fund
• HDFC Pension Management
• SBI Life Insurance
• Reliance Capital Pension
• ICICI Pru Pension Fund Management

Tax Benefits under NPS for NRIs

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:

• Tax Benefits for Salaried Investors -  Salaried investors can claim a tax deduction for contributions up to 10% of their salary under Section 80 CCD (1). Note that the maximum deduction limit here is INR 150,000. NPS also has a unique tax benefit under sub-section 80 CCD (1B), which allows for an additional tax-free investment of up to INR 50,000 beyond the limit set under Section 80 CCE. This advantage is specific to the NPS scheme.
• Tax Benefits for Self-Employed Investors - Self-employed individuals can enjoy a tax deduction of up to 10% of their gross income, with a cap of INR 150,000 under Section 80 CCE. (Tax benefits are subject to changes in tax laws)

Investment Choice – Asset Allocation

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:

Active Choice

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:

• Equity (E) - Up to 75% of your investment can be allocated to equity instruments such as stocks.
• Corporate Bonds (C) - You can allocate up to 100% of your investment to corporate bonds.
• Government Securities (G) - Up to 100% of your investment can be allocated to government securities.
• Alternative Assets (A) - A maximum of 5% of your investment can be allocated to alternative assets.

Auto Choice

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:

• Conservative Life Cycle Fund (LC25) 
• Moderate Life Cycle Fund (LC50) 
• Aggressive Life Cycle Fund (LC75)

How to Check the NPS Application Status Online?

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.

How to Withdrawal or Exit from National Pension Scheme for NRI?

You can withdraw or exit from NPS tier-I and tier–II accounts as per the conditions listed below:

Withdrawal from Tier-I Account

• Premature Withdrawal: If the subscriber joins NPS after turning 60, they could withdraw up to 20% of their corpus as a lump sum after five years or before completing three years. A minimum of 80% must be used to purchase an annuity plan for a pension. If the accumulated corpus is less than INR 2.5 lakh, the entire amount will be paid as a lump sum.
• Partial Withdrawal: After three years, investors can withdraw up to 25% of their contributions for specific reasons such as illness, disability, children's education or marriage, property purchase, or starting a new venture. However, a maximum of three partial withdrawals are allowed throughout the subscriber's NPS tenure.
• Normal Withdrawal: Upon reaching 60 years of age or after completing three years if the subscriber joins NPS after turning 60, one can withdraw up to 60% of their corpus as a lump sum. A minimum of 40% must be used to purchase an annuity plan for a pension. If the accumulated corpus is less than INR 5 lakhs, the entire amount is paid as a lump sum to the subscriber.

As an NPS investor, you can take advantage of the following options -

• Remain in NPS until 75 years of age or exit at any point before reaching 75
• While exiting from NPS, you can - 
  • Defer receiving the lump sum (60% of the corpus) until 75 years of age or withdraw it in instalments until 75 years
  • Defer annuity purchase (40% of the corpus) until 75 years of age

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 from Tier-II Account

Withdrawal or exit from an NPS Tier-II Account is unrestricted and will be mandatorily closed upon the closure of the Tier-I Account.

Charges Associated with National Pension Scheme for NRI

Tabled below are the fees and charges associated with NPS for NRIs –

Point of Presence (POP)
Subscriber registration	Minimum – INR 200 Maximum – INR 400
Initial contribution and subsequent transactions	0.5% of the contribution amount Minimum – INR 30 Maximum – INR 25,000
Non-financial transactions	INR 30
Contribution through eNPS or D-Remit	0.2% of the contribution Minimum – INR 15 Maximum – INR 1,0000
Persistency charges	INR 50 per annum for annual contributions in the range of INR 1,000 and INR 2,999 INR 75 per annum for annual contribution INR 3,000 to INR 6,000 INR 100 per annum for the annual contribution above INR 6,000
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.

Frequently Asked Questions