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If you’re a Non-Resident Indian (NRI) and looking for some tax-benefit, the quintessential retirement savings scheme that most Indians rely on – the National Pension Scheme (NPS) – can be a good option to explore.
Within NPS, depositors are allotted a Permanent Retirement Account Number (PRAN) which is unique to every consumer. NRIs with a PAN card and bank account can open a NPS account online and avail an additional tax benefit of Rs 50,000 under Section 80CCD (IB). This is apart from the Rs 1.5 lakh benefit granted under Section 80C.
What are the prerequisites?
There are two conditions that should ideally be met to open ‘Tier I’ or ‘Tier I and Tier II both’ type of NPS account:
The NRI (18-60 years) should have a bank account in any of the NPS empaneled banks.
He/she should comply with the Know Your Customers (KYC) norms.
What is the process?
The NRI applicant needs to visit the PFRDA NPS trust website and request for fresh registration. Next, one has to choose the applicant type, i.e., NRI and account type, i.e., either repatriable (NRE) or non-repatriable (NRO).
If you want to store your foreign earnings in a safe haven, an NRE account is pitch-perfect. It is tax-free and easily repatriable. An NRO account, on the other hand, is like a resident bank account to store the locally sourced income. Interest earned on this account is taxable and the only USD 1 million can be repatriated from this account annually. Both these accounts are rupee designated.
After selecting the account type, enter the PAN number and select your bank. From the dropdown list, select the country of residence and enter the passport number. After this, enter Aadhaar number and generate a One-Time Password (OTP).
The NPS registration form will now be displayed. Fill the form with necessary personal and bank details to proceed further. Scanned copy of the applicant’s signature as well as their photograph also needs to be uploaded here. Both in JPEG formats (4-12 kb).
PRAN generation
After successful creation of your account, make a contribution of Rs 500 to the NPS account. This will generate a form online. Take a print out, paste your photograph, sign it and send it to the Central Record Keeping Agency (CRKA) of NPS within 90 days of opening the account. They will generate your unique PRAN (used for subsequent online transactions) that will be notified to you via mail and SMS on the registered phone number.
If you fail to send this form to the CRKA, the NPS account will eventually be frozen.
Scheme details
The account holder must select the pension fund manager and investment mode — active or auto. The percentage in different asset classes must be manually entered for active mode while the auto mode fills it by default.
You can also select up to three nominees for the NPS account.