The government of India’s most effective citizen welfare scheme has been the National Pension Scheme (NPS). The intention of the launch of this scheme in 2004 was primarily two.
- to ensure a consistent income generation for the individuals of old age
- based on long term scenario, to ensure a good return which is directly connected to the economic market and its performance
One needs to make an annual contribution of INR 6000 to the NPS account which can be done both as a one-time payment and through installments with a minimum amount of INR 500. With the contribution, the individual would get the Permanent Retirement Account Number (PRAN).
The biggest challenge here is whether the facilities and the requisite contributions can be done by a non-residential individual or not.
NRI Investment in NPS
The government of India posseses absolutely no problem to nri account holders if they intent to invest money in NPS. This is also keeping in mind that many NRIs express a desire to return to their country after the age of 60. With proper identification details, NRIs can open a National Pension Scheme account. The basic criteria include,
- The age limit is within 18 to 60 years
- The basic identification should be either Person of Indian Origin (PIO) or an Overseas Citizen of India (OCI)
- To allow the nri make investments in this scheme, the nri saving account need to complete the KYC (Know Your Customer) formalities.
The method of contribution that is applicable for India citizens are also applicable for nri account holders, be it nri savings account or current. There is also a 12 digit Permanent Retirement Account Number (PRAN) received as they make an annual contribution of 6000 rupees. It must be noted that for nri account holders, the contributed money to this scheme should have its source from either a NRE (Non-Resident Rupee) or an NRO (Non-Resident Ordinary Rupee) account.
It is interesting to know that there are certain nri account benefits in this scheme. For instance like any other Indian the investor can withdraw maximum of 25 percent of their own contribution from the scheme which is called Tier I Account. But for nri account holders, there is a Tier II account, an additional appendage to the Tier I account from where the additional deposited money can withdrawn and again deposited acting as a nri savings account.
The money contributed from nri account is utilized by the government. Most of it is put to use to buy government securities and equities and even corporate bonds. The owner of the nri account benefits from having the option to choose the percent of investment in the securities and equities. There are two major options given to NRi investors. Active choice where the NRi decides the type of asset he wants to invest in and the Auto choice where the regulatory authority who manages the fund investment takes the decision of asset class based on the portfolio of the NRI investor.