NPS for NRIs: A Complete Guide

NPS for NRIs: A Complete Guide

The National Pension Scheme (NPS) is a voluntary savings scheme that was launched in 2004. It is overseen by the Pension Fund Regulatory and Development Authority (PFRDA).

NRIs can use it quite easily, and it is a stable and well-managed investment for old age.

From FY 2020-21, NPS contributions of ₹50,000 over and above the Sec 80C deductions of ₹150,000 are exempt from tax.

Salient Points of NPS


It is available to any NRI between the ages of 18 and 60 years.

Type of NPS

There are two types of NPS, known as Tier I and II, available to ordinary Indians. An NRI can only access Tier I accounts.

There are restrictions on withdrawal, much like the Public Provident Fund (PPF).

How can I subscribe?

  • NPS subscription is a simple process. The NRI version of the NPS form is available on PFRDA, eNPS-NSDL, and NPS-Trust websites.
  • The filled-out form has to be submitted to the NRI’s bank account in India. Both NRE and NRO accounts can be utilized.
  • The first contribution is by check.
  • After processing and verifying KYC, a Permanent Retirement Account Number (PRAN) is generated and sent by email.
  • Any further transactions can be carried out by electronic payments.
  • The first contribution has to be at least ₹500. The minimum amount for subsequent contributions is ₹500 INR. An annual contribution of at least ₹6,000 is necessary to keep the account active.
  • All major Indian banks have to allow NPS facility, as per government norms through POP Service Providers (POP-SP) branches

Exit rules

  • At the age of 60, the NRI can terminate the account.
  • If the total amount due to him is less than ₹2 lakhs, he can withdraw all of it.
  • If the total amount payable is more than ₹2 lakhs, he can withdraw a maximum of 60%, and the remaining 40% will be paid out through annuities.
  • It is possible to stay invested until the age of 70. Further investment is also permissible during this decade-long deferral.
  • If the NRI terminates the account before the age of 60, he can receive at most 20% as a lump sum. The remaining 80% will be returned to him as an annuity.
  • If he is deceased, the entire amount would be paid to the nominee.

Investment Plan

NPS offers a variety of investment strategies. An investor is free to change the type of fund investment.

  • E category is invested 75% in equity.
  • C category allows 100% investment in blue-chip corporate bonds.
  • G category allows 100% investment in bonds issued by the government.

Benefits of NPS investment

NPS is an EEE investment (exempt-exempt-exempt). It is tax-exempt at the time of investment, interest paid annually is tax-exempt, and the final corpus is also exempt from tax. This allows a pensioner much-needed relief in old age. This makes it an ideal choice for investment.

At this moment, eight pension fund managers operate NPS funds:

  • HDFC
  • SBI
  • LIC
  • UTI
  • Reliance Capital
  • Kotak Mahindra
  • Birla Sun Life

These are extremely reputed financial institutions with the highest levels of transparency and governance.

The performance of the funds has been above average. That is why it has emerged as a viable alternative to PPF.

The average five-year return on E category funds has been 7.2% to 9%, C category funds have been between 7.9% and 9.3%, and G category funds have been between 9.8% and 10.6%.

This matches the annualized returns of most top-rated mutual funds and is far more than bank-fixed deposits.

Unlike mutual funds, there are no entry and exit loads and no management fees. In the long run, this saves a large amount.

If you are looking for a safe avenue to invest where your savings would grow at 7% to 11% annually and also provide tax benefits, there is no better choice than NPS.

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