Whether you are an Indian citizen or a Non-Resident Indian living abroad, retirement planning is a key financial
goal. The National Pension System (NPS) is a government initiative that can help you plan your income for your
retirement.
NPS is a retirement savings scheme that the Government of India launched in 2004. When you open an NPS account, you
must make regular contributions. These contributions are invested in market instruments to give you market-linked
returns. When
you open an NPS account, you ensure that your retirement years are financially secured. NPS account is a
cost-effective and tax-efficient scheme that helps you plan for retirement. The amount of money you invest in your
NPS account becomes
the basis on which you earn returns.
Who can open an NPS Account?
Anyone who is an Indian citizen between the age of 18 and 60 years
can open an NPS account. This includes NRIs. As long as you hold a valid Indian passport and are an Indian citizen,
you can open
an NPS account. However, NRIs can open only Tier I NPS accounts. The voluntary Tier II NPS account is not available
for NRIs.
Difference between Tier I and Tier II NPS Account
NPS Tier I account is a mandatory
account. When investing in NPS, your initial contribution must be made to the Tier I account. This account requires
a minimum contribution
of Rs. 500 per transaction and a minimum of Rs. 1000 yearly. Contributions to the Tier I account are also eligible
for tax benefits under Section 80C of the Income Tax Act.
Tier II accounts are voluntary accounts. To open a Tier
II NPS
account, you must invest in a Tier I account. The minimum amount per contribution to a Tier II account is Rs. 250,
however, no minimum balance is required to be maintained. While you can withdraw from the Tier II account without
any restrictions,
it is not eligible for tax benefits and the amount that you withdraw is taxable. NRIs are not eligible to open Tier
II accounts.
[Also Read: Five
smart investment avenues to plan your retirement]
NPS Account Eligibility
To open an NPS account, you must meet the following eligibility criteria:
1. You should be a citizen of
India
2. Your age should be between 18 years and 60 years
3. You should have a valid bank account. For NRIs,
this can be in
the form of a Non-Resident External Account or a Non-Resident Ordinary Account
4. You should comply with all the
KYC requirements
5. You should have a valid PAN card
Benefits of an NPS Account
1. NPS investments allow you to make arrangements for regular income for your retirement.
2. Investing in an NPS
account is a simple procedure. You can do it online
3. You have the option of investing in both debt and equity
instruments.
You can decide the proportion based on your age. This ensures stable returns as well as the potential to earn higher
returns
4. There is a range of pension funds to choose from. You can shift between funds without any
hassle.
5.
It is easily portable across locations and jobs.
6. NPS is well-regulated by the PFRDA.
The process of applying for an NPS Account
NRIs may find it easy to opt for the online process of applying for an NPS account. You can do it directly on the NPS
website or through any commercial or public bank that allows NRIs to open an NPS account online.
1. Visit the
official axis
bank website and choose the ‘Individual Subscriber’ option
2. It will ask for your residential status – choose
NRI
3. Select the Tier I NPS account option
4. Enter your PAN or Aadhaar details
5. Choose your Point of Presence service provider. They will also help you complete your KYC
6. The website
will ask you to upload copies of certain documents such as your PAN/ Aadhaar card, a cancelled cheque of a valid
bank account,
a photo and signature
7. Confirm whether your bank account is repatriable or
non-repatriable
8. Enter details of your NRE Account or NRO
bank account
9. Enter your communication address details. This can be your permanent address in India or an overseas
address.
10. Make the required payment for opening your NPS account
11. After you have made the payment, you
will get your
Permanent Retirement Account Number (PRAN)
12. After you receive your PRAN, you will need to complete
authentication. There are two ways to do this:
i) You can do it online using the e-sign option
ii) You can
print the details
and send them to the bank where you have your NRI Account
Things to Keep in Mind
1. As an NRI, your NPS account will be valid only till you remain an Indian citizen. If you cease to be an Indian
citizen, your account will automatically close.
2. You can choose between two modes of investment – Active and
Auto. Under
the Active Mode, you can choose how you want to invest your funds. Under the Auto Mode, you simply have to choose
your risk profile, and the allocation will be made automatically for you.
3. You must appoint nominees for your
pension
account. You can choose up to three nominees.
4. You have to make a minimum of Rs. 500 per contribution and
maintain a Rs. 1,000 yearly balance in your NPS account.
5. There is no
maximum limit.
6. You cannot withdraw from your pension account until three years of investment. After that, you
can withdraw partially in case of emergencies such as paying for a medical requirement, or other specific
financial needs like your child’s education or building a house.
As an NRI, you can open an NPS account as long as you meet all the NPS account eligibility
requirements. Opening an NPS account makes it easy for you to plan
your retirement. However, you can only open a Tier I NPS account and keep it active until you are an Indian citizen.
Disclaimer: This article is for information purpose
only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank
Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss
or liability incurred by the reader for taking any financial decisions based on the contents and information.
Please consult your financial advisor before making any financial decision.
