Can NRIs and OCIs invest in NPS?
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Before you continue reading How financially free are you? Most people overestimate their financial freedom. Discover your Financial Freedom score through a quick survey Calculate My Score Can NRIs, OCIs and PIOs invest in the NPS? NPS eligibility criteria for NRIs NPS account types for NRIs NPS tax benefits for NRIs NPS tax benefits for NRIs: Deductions and withdrawal tax rules explained NPS tax benefits for NRIs The Pension System (NPS) is a government-backed retirement savings scheme designed to help individuals build a retirement corpus through regular savings during their working years.Subscribers to the NPS can invest in a variety of government assets, corporate bonds, and equities. Additionally, they have the freedom to select an investment option with the NPS and a fund manager (such as active or auto allocation).However, many NRIs are unsure whether they are eligible to open and invest in an NPS account? The answer is yes!Non-Resident Indian (NRIs) and Overseas Citizens of India (OCIs) are permitted to invest in the NPS, provided they meet the prescribed eligibility criteria.
However, Persons of Indian Origin (PIOs) are not eligible to invest in the NPS.Individuals must be an Indian citizen (even if residing abroad). The minimum entry age is 18 years, and the maximum is 70 years at the time of joining the NPS.Note that NPS contributions must be made through an NRE (Non-Resident External) or an NRO (Non-Resident Ordinary) bank account.NRIs must comply with KYC norms, including a valid Indian passport, proof of address, and other identification documents.There are two types of accounts under the Pension System (NPS) — Tier I and Tier II where NRIs can invest.The Tier I account is the primary retirement account and is mandatory for all NPS subscribers. It offers tax benefits but has restricted withdrawal rules until retirement.The Tier II account is a voluntary savings account that does not offer tax benefits and allows withdrawals at any time. However, under the current regulations, NRIs are not permitted to open a Tier II NPS account.The NPS can provide a favourable tax structure under the Indian Income Tax Act even for NRIs under the old tax regime.Contributions made by NRIs to their NPS Tier I accounts are eligible for the same tax deductions as those available to resident Indians:Section 80C: Deduction up to Rs 1.5 lakh annually under the overall limit.Section 80CCD(1B): Additional exclusive deduction of Rs 50,000 over and above Section 80C for NPS contributions.Both these tax benefits are provided under the old tax regime.NRIs can lower their taxable income in India by claiming a total deduction of Rs 2 lakh throughout a fiscal year.
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