National Pension Scheme for NRI

What is the National Pension Scheme for NRI?

The National Pension Scheme for NRI is a retirement plan introduced by the Government of India as a part of pension sector reforms. The scheme is a long-term, voluntary retirement savings plan in India which is administered and regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Any NRI who holds a non-resident external (NRE) or non-resident ordinary (NRO) account can invest in NPS to generate a retirement corpus, which is a combination of equity, government securities, and debt. This ensures minimal impact on returns for subscriber contributions, even if the market is down.

In short, an NPS for NRI scheme allows non-resident Indians to accumulate a safe retirement fund in India and incur tax advantages accordingly. Another advantage is that it offers multiple possibilities for NRIs because of its structured investment options.

When the person reaches 60 years, they can easily withdraw up to 60% of the maturity benefit in a single lump sum payment. They can also use the remaining 40% to purchase another annuity scheme for a regular pension.

 

Key Features of the NPS for NRI Account

The primary objective of the National Pension Scheme for NRI is to promote savings and investment and help individuals plan their retirement. Meanwhile, the following features make it an excellent choice for long-term wealth accumulation:

 

Flexibility and Portability

The Central Recordkeeping Agency (CRA) issues a Permanent Retirement Account Number (PRAN) to each subscriber of the NPS scheme. This helps them maintain their respective databases along with all recorded transactions until their retirement. PRAN ensures portability and continuity of the pension account across employment, geographies, and sector changes.

Another positive part about the NPS scheme for NRI is that the PRAN remains the same for the subscriber’s lifetime and ensures efficient portability if someone is moving to a new location in India.

 

Voluntary Contributions

The National Pension Scheme for NRI allows subscribers to participate in investments voluntarily according to their financial capacity. Unlike traditional pension schemes, this retirement plan allows investors to contribute as and when convenient. The minimum investment expected from the NRIs is minimum ₹500 for each transaction and ₹1000 annually², while opening a Tier I account.

There is no cap on the invested amount, which makes NPS an excellent retirement planning scheme for individuals with higher net worth.

 

Investment Portfolio Options

NRIs can easily customise their portfolios, thanks to the flexibility offered by NPS. This allows better diversification and risk management. The scheme provides multiple investment portfolio options for the subscribers, such as Equity (E), Corporate Bonds (C) and /or Government Securities (G).

The equity option allows investments in stock-market-linked instruments for better long-term returns. Conversely, NRIs can also invest in high-rated corporate bonds issued by several reputed Indian corporates. The Government securities option, on the other hand, focuses on investments across central bonds and treasury bills, which are often considered less risky instruments.

 

Partial Withdrawals and Exits

NPS for NRI also allows partial withdrawal from the account if needed. Under the Tier I scheme, you will be allowed to withdraw a maximum of 25% of your contributions. The same rule applies if your employer also contributes to your account. There are no such restrictions if you have a Tier II account. However, the amount withdrawn within 3 years is taxable in the year of withdrawal for employees who have claimed deductions under Section 80C.

 

Eligibility Criteria for National Pension Scheme for NRI

Any Indian citizen (resident or non-resident) or an Overseas Citizen of India (OCI) aged between 18-70 years³ is eligible for the NPS scheme. However, that person must also be compliant with the Know Your Customer (KYC) norms.

Persons of Indian Origin (PIOs) or Hindu Undivided Families (HUFs) are not eligible for the NPS scheme for NRI. It’s an individual account that cannot be opened on behalf of another person. Moreover, the applicant must be legally competent to execute a contract as per the Indian Contract Act, 1872.

Here are some other considerations to keep in mind⁴:

• Compliance with KYC norms are mandatory. This includes submission of a valid Indian passport, address proof, and other important documents.
• Only NRE or NRO accounts may be linked for NPS contributions. Fund transfers into NPS must comply with RBI and FEMA regulations.

 

How to Invest in NPS as an NRI – Step-by-Step Guide

NPS is usually distributed through authorised entities called Points of Presence (POP). Almost all the private and public sector banks in India can act as a Point of Presence under this retirement fund plan.

On that note, here is a step-by-step guide to investing in NPS as an NRI:

1. Visit the official eNPS website.
2. Click on the ‘National Pension System’ option and select ‘Registration.’
3. Navigate to the ‘Status of Applicant’ field and choose ‘Non-resident of India.’
4. Go to the ‘Register with’ option, select ‘Permanent Account Number’ and register using your PAN card.
5. Provide additional details, such as your NRE or NRO account, bank account number, passport number, and current country of residence.
6. Click on continue and specify your investment details.
7. Select the scheme and your pension fund manager.
8. Upload all the scanned copies of your required documents, photograph, and signature.
9. Complete the form and collect its hard copy.
10. Sign the printed form and send it to the CRA within 90 days of registering for NPS.

 

Investment Options & Fund Management for NRIs under NPS

NRIs investing in NPS can select from multiple fund options and asset allocations. The retirement plan offers solutions for varying risk appetites and retirement goals. The two primary investment strategies are Active Choice (individual funds) and Auto Choice (lifecycle fund), each with distinct control levels and equity exposure limits.

In Active Choice investments, the subscriber can actively decide how their contributions are to be invested, based on personal preferences. Here is the equity allocation matrix for this choice:

In the Auto Choice fund, investments are spread across three asset classes based on a predefined portfolio that typically adjusts according to the subscriber’s age. It has three types: The aggressive life cycle fund, which allows a cap of 75% of the total assets for equity investment, the moderate life cycle fund with a cap of 50%, and the conservative life cycle fund with a cap of 25% of total assets.

 

Withdrawal Rules for National Pension Scheme NRI Accounts

The NPS for NRIsoffers flexible but regulated withdrawal options depending on age, exit timing, and circumstances. Withdrawals are governed by rules to ensure long-term retirement security.

At maturity (age 60), partial lump sum and mandatory annuity purchase are allowed. Premature exits involve stricter annuitization requirements. As mentioned earlier, nominees can claim full benefits in case of death. Subscribers can also defer withdrawals and continue investing up to age 75.

Meanwhile, here are the key NPS withdrawal rules for NRIs⁵:

• At Retirement (60 years): Up to 60% lump sum, minimum 40% annuity. If corpus ≤ ₹2 lakh, full withdrawal allowed.
• Early Exit (Before 60 years): Up to 20% lump sum, minimum 80% annuity. If corpus ≤ ₹1 lakh, full withdrawal allowed.
• Deferment Option: Continue till 75; defer lump sum to 70, annuity by 3 years.
• On Death: Nominee gets 100% lump sum.

Here’s an overview of the withdrawal summary table⁵:

 

Benefits of NPS for NRIs – Why Choose It?

The NPS scheme for NRIs offers several benefits for interested subscribers and investors, such as:

 

Market-Linked Returns & Inflation Hedge

NPS invests contributions across equities, corporate bonds, and government securities. The scheme offers market-linked returns instead of fixed, low-interest earnings. Over the long term, this helps NRI investors build a retirement corpus that can grow faster than inflation. It further leads to real wealth preservation and a higher standard of living post-retirement.

 

Low-Cost, Efficient Fund Management

The scheme regulated by the PFRDA boasts exceptionally low fund management charges (as low as 0.01%). This makes it one of the most cost-efficient pension products globally. It also ensures more of the investment goes towards wealth creation, not management expenses.

 

Long-Term Retirement Income via Annuity

At maturity (age 60 or above), an accumulated corpus of up to 60% can be withdrawn tax-free in India, while the remaining 40% must be used to purchase an annuity. This provides NRIs with a steady retirement income for life. It means they will continue to receive a regular pension post-retirement that supports lifelong financial security.

 

Flexibility in Contributions and Account Management (H3)

NPS offers flexibility in frequency and quantum of contributions, with minimum annual contributions (as low as ₹1,000) and no cap on the maximum. NRIs can contribute as per their financial situation, choose their asset allocation style, and even switch fund managers. This helps with easy account management across countries and time zones.

 

Tax Benefits

Contributions to NPS qualify for deductions under Section 80C (up to ₹1.5 lakh) and Section 80CCD(1B) (an additional ₹50,000) for NRIs with taxable Indian income. Over 60% of the final corpus withdrawn is also tax-exempt in India, and the annuity ensures a stable, predictable post-retirement income stream.

 

Portability and Global Access

The NPS account remains operational and fully accessible regardless of where the NRI resides globally. There’s no need to close or reopen the account if residential status changes, and contributions can be made securely through NRE or NRO bank accounts.

 

Tax Benefits of the National Pension Scheme for NRIs 

NRIs investing in the NPS scheme enjoy significant tax benefits under various sections of the Income Tax Act. They can easily reduce their taxable income while building a retirement corpus in India.

 

Section 80C

NRIs can claim deductions for personal contributions to NPS scheme up to a limit of ₹1.5 lakhs in a financial year.⁴

 

Section 80CCD(1B):

Offers an additional exclusive deduction of up to ₹50,000 specifically for NPS contributions over and above the ₹1.5 lakh limit, increasing total potential deductions to ₹2 lakhs⁴.

 

Key Takeaways

1. NRIs can invest in the NPS scheme in India and build up savings for retirement.
2. The NPS for NRI accounts is a combination of investment instruments and asset classes like equity, government securities, and corporate bonds.
3. Since you will be an individual subscriber, your choice of investment will always be according to your risk appetite.
4. You can exit from the NPS scheme before 60 years.
5. In case of an unfortunate event, like death, the nominee can receive 100% of the NPS pension wealth as a lump sum.

 

Conclusion

The National Pension Scheme for NRI is an excellent plan for retirement in India. The advantages of this plan are tax benefits, flexibility, market-related returns, and portability. The requirement for subscribing to this retirement plan is an NRE or an NRO account. You can also create a substantial retirement corpus and get the advantages associated with regular income through annuity plans with small contributions to this retirement fund plan. You may also use a retirement calculator to plan your contributions effectively.

 

Frequently Asked Questions (FAQs) on the National Pension Scheme for NRI

 

1. Can NRIs open NPS accounts and continue contributing while abroad?

Yes, NRIs can open NPS accounts and continue making contributions while abroad. However, they must meet eligibility criteria, have an Indian PAN, including an NRE or NRO account for contribution, and maintain an Indian bank account.

 

2. Is a Tier II NPS account available for NRIs?

No. NRIs cannot open a Tier II NPS account because it is restricted to resident Indians under the current regulations⁴. NRIs can only open a Tier I account for retirement planning in the country.

 

3. How are NPS withdrawals from NRI accounts taxed in India and abroad?

The lump sum withdrawal at retirement (up to 60%) is usually tax-exempt⁴">. For partial withdrawals, up to 25% of contributions are allowed to be withdrawn tax-free after three years⁴.

 

4. What happens to my NPS account if I become an OCI (Overseas Citizen of India)?

Your NPS account remains active and functions similarly to that of an NRI even after you become an OCI.

 

5. What documents are mandatory to maintain an NPS account as an NRI?

The following documents are mandatory for maintaining a National Pension Scheme for NRI account⁶:

• Filled in the subscriber registration form
• Copy of Passport
• Proof of Address, if the local address is different from the address in the passport

 

Source

1. https://www.goinri.com/blog/national-pension-scheme-for-nris
2. https://npscsc.in/index.php/Website/index/faq
3. https://financialservices.gov.in/beta/en/national-pension-system-all-citizen-model
4. https://www.proteantech.in/articles/nps-for-nri-24-06-2025/
5. https://www.mea.gov.in/images/pdf/nps-for-nri.pdf
6. https://www.mea.gov.in/Portal/CountryNews/4929_FAQs_on_NPA_for_NRIs.pdf
7. https://pfrda.org.in/documents/33652/154008/Circular+on+Introduction+of+MSF+for+Non+govt+Sector+subscribers+under+NPS.pdf