NPS for NRI - How NRIs Can Open NPS Account in 2025

2. Why NRIs Should Consider NPS in 2025

The National Pension System (NPS) is one of the best retirement savings options for NRIs, offering significant benefits tailored to the unique needs of non-resident investors. As the global financial landscape evolves in 2025, here's why you should consider opening an NPS account if you’re an NRI:

2.1 Long-Term Retirement Planning in India

The NPS provides a disciplined and reliable way to save for retirement, leveraging diversified investments across multiple asset classes such as equity, corporate bonds, and government securities. This diversified approach ensures that your savings grow over time while protecting them against market volatility.

Equity (Scheme E): Historically, NPS equity investments have delivered annual returns of 12-15%, providing a strong growth engine for your retirement savings.

Government Bonds (Scheme G): Offering more stability, these bonds have returned 9-10% annually, making them a safe bet in uncertain market conditions.

Corporate Bonds (Scheme C): Corporate bonds yield 8-10% returns, offering a good middle ground between risk and reward.

By mixing these asset classes, NPS provides a balanced approach to long-term growth. Equity investments tend to have higher returns but come with increased volatility, while government bonds and corporate bonds offer more stability but lower returns. This asset allocation helps you manage risk and increase your savings over time, ensuring that your money grows steadily and outpaces inflation.

2.2 Low-Cost, Government-Backed Scheme

NPS stands out not only for its investment potential but also for its affordability. The fund management fees are exceptionally low, ranging from 0.01% to 0.1% annually. This makes NPS one of the most cost-effective retirement plans available, especially compared to other investment options like mutual funds or private pension plans.

Additionally, starting with NPS is budget-friendly. The Tier I account, which is the mandatory retirement account, requires just ₹500 to open, with a minimum annual contribution of ₹1,000. This makes it accessible to NRIs from all income brackets.

NPS also operates under the PFRDA Act of 2013, with government oversight ensuring that the scheme remains secure and well-regulated.

2.3 Global Accessibility and Portability

One of the most significant advantages of NPS for NRIs is its portability. Whether you are living in the US, UAE, Singapore, or any other country, your NPS account remains active. This is ideal for mobile NRIs who move frequently or those who plan to eventually return to India.

• Permanent Retirement Account Number (PRAN): When you open an NPS account, you get a unique PRAN, which stays with you, even if you change countries.
• Easy Contributions: You can contribute to your NPS account from your NRE or NRO accounts, making the entire process seamless, no matter where you are.

If you decide to move back to India permanently, you can simply convert your NPS account from NRI status to resident status, without any additional paperwork or fees. This smooth transition makes NPS a highly flexible, long-term retirement solution for NRIs.

Furthermore, the eNPS portal and mobile app give you 24/7 access to your account. Whether you're in India or abroad, you can monitor your NPS account anytime and manage your investments efficiently. This global accessibility means you can stay connected to your Indian retirement savings even while living abroad.

2.4 Tax Advantages and Contributions

NPS offers compelling tax benefits that make it a highly attractive retirement option for NRIs. Contributions to NPS Tier I accounts are eligible for deductions under Section 80CCD(1B) of the Income Tax Act. You can claim:

• Up to ₹1.5 lakh in tax deductions for contributions to NPS under Section 80CCD(1).
• An additional ₹50,000 in tax deductions under Section 80CCD(1B), which is exclusive to NPS.

These tax benefits can significantly reduce your taxable income in India, providing immediate financial relief while helping you save for the future.

2.5 Active vs. Auto Choice Investment Strategies

NPS offers two investment strategies depending on how much control you want over your asset allocation:

• Active Choice: With Active Choice, you decide how much to invest in equity, corporate bonds, government securities, and alternative investments. You can allocate up to 75% of your funds into equity until you turn 50. After that, the equity allocation is gradually reduced by 2.5% each year. This strategy allows you to be more hands-on with your investments and is ideal if you’re familiar with market dynamics and want to optimize your returns.
• Auto Choice: For those who prefer a more hands-off approach, the Auto Choice strategy adjusts your asset allocation automatically based on your age. As you get older, the system shifts your investments towards more conservative options (e.g., government bonds and corporate bonds), ensuring a lower risk profile as you approach retirement.

3. Who Can Apply and What You Need

The National Pension System (NPS) offers NRIs a valuable opportunity to plan for retirement, but it’s essential to understand the eligibility criteria and the documents required to open an account. In this section, we’ll walk you through the application process and what you need to get started.

3.1 Eligibility Criteria for NRIs

To open an NPS account as an NRI, you must meet the following basic eligibility criteria:

• Indian citizenship: You must be an Indian citizen, whether you are a resident or non-resident.
• Age requirement: You must be between 18 and 70 years old at the time of application. This age range was extended from the earlier limit of 60 years, making NPS accessible to a wider range of investors, including those who want to start saving for retirement later in life.
• KYC compliance: You must fulfill the Know Your Customer (KYC) requirements, which we’ll cover in more detail in the next section.

It's worth noting that while NRIs are eligible for Tier I accounts, they typically cannot open a Tier II account. The Tier II account offers more flexibility in withdrawals but fewer tax benefits, and is generally only available to resident Indians.

3.2 Required Documents and KYC Norms

Opening your NPS account requires submitting a few key documents for identity and address verification. NRIs must comply with KYC norms to ensure the security of the system and verify your identity.

Here are the documents you will need to provide:

1. Recent Passport-sized Photograph
2. A clear passport-sized photograph is necessary for account registration.
3. PAN Card (Mandatory)
4. The Permanent Account Number (PAN) card is a mandatory document for all Indian citizens and NRIs. This is used to link your NPS account with your tax records.
5. Indian Passport Copy
6. You must provide a copy of your Indian passport as proof of your citizenship. This helps verify your identity as an NRI.
7. Proof of Address

• Indian Address Proof (if applicable): If you have an Indian address, you’ll need to provide proof (e.g., utility bill, bank statement, etc.).
• Foreign Address Proof: As an NRI, you’ll also need to provide proof of your foreign address, such as a utility bill, bank statement, or lease agreement.

1. Proof of NRE/NRO Bank Account
2. A canceled cheque from your NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account must be provided. This confirms your bank details and allows you to contribute to your NPS account through these accounts.

3.3 KYC Verification

KYC is an essential step before your NPS account can be activated. For NRIs, there are two ways to complete the KYC process:

• eKYC (Electronic KYC): NRIs can complete the KYC process electronically via the eNPS portal using their Aadhaar or PAN details. This method is the quickest and simplest.
• Physical Verification: After completing the online application, you must send the signed physical form (generated during the registration process) along with a photograph. This form must be mailed to the Central Recordkeeping Agency (CRA) within 90 days from the date of online registration.

Failure to submit the physical form within the given period may result in your account being frozen until the necessary documents are submitted.

3.4 Restrictions for OCIs and PIOs

Over the years, the rules for Overseas Citizens of India (OCI) and Persons of Indian Origin (PIO) have evolved. As of 2019, the Indian government has allowed OCIs to invest in the National Pension System (NPS), but with some restrictions:

• OCI Account Types: Like NRIs, OCIs can only open Tier I accounts in the NPS, which are meant for retirement savings. They are not allowed to open Tier II accounts, which offer more flexibility but fewer tax benefits.
• OCI Documentation: OCIs must provide their OCI card as part of the KYC process when opening their NPS account.
• Bank Account: OCIs must use their NRE or NRO accounts for NPS transactions, just like NRIs.

However, PIOs (Persons of Indian Origin) are not eligible to open NPS accounts. In addition, Hindu Undivided Families (HUFs) are also excluded from participating in the NPS scheme.

Note: You cannot use a Power of Attorney (PoA) to open an NPS account on someone’s behalf. The application and verification process must be completed by the individual investor themselves, though you can nominate someone to receive your funds upon death.

4. How to Open an NRI NPS Account

Opening an NPS account as an NRI is a simple and user-friendly process. Thanks to the eNPS portal, NRIs can complete the entire application online without having to visit any branch. The steps are straightforward, and you can begin planning your retirement fund from anywhere in the world.

Here’s a detailed breakdown of how to open your NPS account in just a few easy steps:

Step 1: Visit the eNPS Portal

To get started, go to the official eNPS website managed by the Pension Fund Regulatory and Development Authority (PFRDA). Look for the "New Registration" or "Registration" button on the homepage.

• Direct link: eNPS portal
• The portal is designed specifically for NRIs, making it simple to apply for an NPS account from anywhere globally.

Step 2: Choose Account Type and Fill Personal Details

Once you’ve accessed the eNPS portal, you’ll need to choose “Non-Resident Indian (NRI)” as your residential status. After that, you will be asked to choose between a "Repatriable" or "Non-Repatriable" account. The choice you make will depend on whether you want to be able to transfer your NPS funds abroad in the future.

• Repatriable Account: This account allows you to transfer both your principal and interest abroad (via your NRE account).
• Non-Repatriable Account: The funds in this account can be withdrawn in India, but you cannot transfer them abroad.

You’ll also need to fill in your personal details, including:

• Full name
• Date of birth
• Father’s name
• Contact information (email and mobile number)
• Communication address (Indian or foreign address)

Step 3: Upload Documents and Make Initial Contribution

Next, you will be required to upload documents to verify your identity. These documents include:

• Passport-sized photograph
• PAN Card
• Indian passport copy
• Proof of NRE/NRO bank account (e.g., canceled cheque)

After uploading the documents, you will need to make your first contribution to the NPS account. The minimum contribution for Tier I accounts is ₹500, which you can make using internet banking or a debit card linked to your NRE or NRO account.

Once your payment is processed, you will receive your Permanent Retirement Account Number (PRAN). This 12-digit number will be your unique identifier for all future NPS transactions.

Step 4: Send Signed Form to CRA

After completing the online registration and payment, the system will generate a signed form with your details. You need to print this form, sign it, and affix your photograph in the designated areas.

• Mail the signed form along with a self-attested copy of your documents (such as your passport, PAN card, etc.) to the Central Recordkeeping Agency (CRA).
• The physical form must be mailed to CRA within 90 days of registering online, or your account will be frozen.
• Make sure to keep a copy of the form for your records.

Once CRA verifies your documents, your NPS account will be fully activated, and you can begin managing your retirement fund.

Step 5: Access and Manage Your NPS Account

After the successful activation of your NPS account, you can manage it easily through the eNPS portal or mobile app. This platform allows you to:

• Track your contributions
• Check your balance
• Switch between investment options (Active or Auto Choice)
• Make additional contributions

Important Notes for NRIs

• Documents must be submitted within 90 days: If you fail to submit the signed form to CRA within the required timeframe, your account will be temporarily suspended.
• Keep your details updated: If your contact information or bank details change, make sure to update them in the eNPS portal to avoid any future issues with contributions or withdrawals.
• Minimum Contribution: The minimum contribution for Tier I accounts is ₹500, and ₹1,000 for a Tier II account, though Tier II accounts are not available for NRIs.

This step-by-step guide ensures that the process to open your NPS account is as smooth and hassle-free as possible.

By following these steps, you will be able to start saving for your retirement in India while benefiting from the low-cost, flexible, and tax-efficient features of NPS.

5. Understanding Investment and Returns

Once your NPS account is activated, the next step is to choose how your money is invested. NPS offers various investment options that suit different risk appetites and financial goals. The key to growing your retirement savings lies in choosing the right combination of assets, depending on how much risk you are willing to take and how long you plan to stay invested.

5.1 Tier I vs Tier II Accounts for NRIs

NRI investors can only open Tier I accounts under the NPS scheme. Tier I is designed for retirement planning and comes with a lock-in period until the age of 60. During this time, partial withdrawals are allowed only after 3 years for specific needs like education, marriage, or medical emergencies.

Unlike resident Indians, NRIs cannot open Tier II accounts, which offer more flexibility in withdrawals but do not provide the same tax benefits. Therefore, the focus for NRIs should be entirely on Tier I accounts, which are tax-efficient and structured for long-term retirement planning.

5.2 Active vs Auto Choice Investment Strategy

NPS provides two main investment options:

1. Active Choice

• In this option, you are in control of your investment allocation. You can choose how to split your funds among different asset classes: Equity (E), Corporate Bonds (C), Government Securities (G), and Alternative Investments (A).
• You can allocate up to 75% of your funds in equity until you turn 50. After that, the percentage of equity exposure gradually decreases by 2.5% each year.
• This option is ideal for those who are familiar with market trends and want to actively manage their investments based on their risk tolerance.

1. Auto Choice

• If you prefer a more hands-off approach, the Auto Choice option automatically adjusts your asset allocation as you age. The system becomes more conservative as you approach retirement age.
• The Auto Choice option offers three risk profiles:
• Conservative Lifecycle Fund (LC-25): Maximum 25% equity exposure
• Moderate Lifecycle Fund (LC-50): Maximum 50% equity exposure
• Aggressive Lifecycle Fund (LC-75): Maximum 75% equity exposure
• Auto Choice is designed for NRIs who want to save for retirement but prefer the system to handle investment allocation based on their age and risk tolerance.

5.3 Expected Returns from Different Asset Classes

Your returns in NPS will vary based on your investment strategy and market conditions. Here’s a breakdown of expected returns from different asset classes available in NPS:

• Equity (Scheme E):
• Historically, equity investments in NPS have provided annual returns of 12-15%. These returns tend to be volatile in the short term but can offer higher growth in the long term.
• Since equity investments come with higher risk, they tend to outperform other asset classes over time. However, the risk factor is significant in the short term, so this option is best suited for those with a longer investment horizon.
• Government Bonds (Scheme G):
• Government securities are considered a safe investment, providing stable returns of 9-10% annually. These are ideal for NRIs who are more risk-averse and prefer stable, lower-risk returns.
• These investments are backed by the Indian government, which offers strong protection during market volatility, but the returns are lower compared to equity.
• Corporate Bonds (Scheme C):
• Corporate bonds offer a balance between risk and return, with expected returns ranging from 8-10% annually. These investments provide higher returns than government bonds but come with more risk, as they are dependent on the financial health of the companies issuing the bonds.
• Alternative Investments (Scheme A):
• For NRIs who want to diversify further, NPS offers Alternative Investments (such as real estate and infrastructure). These tend to have higher returns but come with greater risks. However, the allocation to this scheme is generally smaller and may be included as a part of the diversified portfolio.

6. Taxation, Withdrawals, and Repatriation

The National Pension System (NPS) offers NRIs substantial tax benefits, flexible withdrawal options, and a smooth process for repatriating funds back to your country of residence. Understanding these features is crucial for maximizing the benefits of your NPS investment.

Let’s break down the important aspects related to taxation, withdrawals, and repatriation.

Conclusion

The National Pension System (NPS) offers NRIs a low-cost, government-backed retirement savings option with attractive returns, tax benefits, and global accessibility. With returns between 9-15%, NPS provides a solid foundation for your retirement savings, whether you’re in India or abroad.