Did you know that Overseas Citizens of India (OCI) cardholders, who are individuals of Indian heritage presently holding foreign citizenship, are allowed to hold an NPS (National Pension Scheme) account in India?
OCI cardholders can stay for indefinite periods in India without having to apply for a visa every single time, since having an OCI card grants them a multiple-entry lifelong visa for visiting India. In case they wish to stay here for extended periods, or for as long as they want, OCI cardholders can voluntarily open an NPS account “applicable to resident Indians,” according to NSDL. However, note that OCIs are not permitted to open NPS Tier-II accounts.
Read on to know what documents you need to open an NPS account as an OCI cardholder and steps to close it in case you have acquired foreign citizenship and have not received their OCI card.
Can OCI cardholders open and hold NPS accounts?
Yes, all OCI cardholders aged between 18 and 70 years are eligible to open an NPS account on either a repatriation or non-repatriation basis.
Explains CA Ashish Niraj, Partner, ASN & Company Chartered Accountants, “For OCIs, both repatriation and non-repatriation basis options are available in NPS. Repatriation basis means that the proceeds can be taken back to the investor’s home country. Non-repatriation basis means that proceeds should remain in India and cannot be taken back by the investor.
This means that OCIs have the choice to either remit or send their lump-sum withdrawal from NPS or their monthly pension received from India to the country of which they now hold citizenship, or not do so, i.e., not transfer back these funds to that country.
In NPS, subscribers can partially withdraw from tier-1 accounts for specific purposes, and such partial withdrawal is tax-free. For lump-sum withdrawal, a maximum of 60% of total corpus is allowed, which will also be tax-free
To open an NPS account with NSDL using an Aadhaar or PAN card, OCIs will have to provide a scanned copy of their OCI card, proof of their foreign address, and their scanned signatures, according to the NSDL website.
Applicants are also required to provide the details of NRE/NRO accounts only, along with a cancelled check/copy of bank passbook/bank statement/bank certificate/letter from the bank containing the applicant’s name, bank name, bank account number, and IFS/SWIFT code, per the NSDL site.
Which account can OCIs use for contributing to NPS?
Note that NPS contributions can only be made through an OCI cardholder’s NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account. However, in case the OCI NPS subscriber wishes to repatriate, or send back, their funds, they should take care to make their NPS contributions only via their NRE a/c. This is because only NRE, and not NRO a/cs allow individuals to remit back funds to their country of residence at any time, without any limits.
As for annuities, according to the NDSL website, “Annuity payable by ASPs (annuity service provider) to NRIs and OCIs will be taxed at source, at rates applicable as per the DTAA (Double Taxation Avoidance Agreements) of the country where the annuitant resides”,
Niraj adds, saying that while TDS will be applicable on pension received from annuity, subscribers can take advantage of DTAA in their country if there is a DTAA with that country. “Since in NPS, the minimum rate of return is higher compared to normal saving instruments, OCIs, for whom this avenue was opened in 2019, should explore investing in it,” he adds.
Can I hold an NPS account if I don’t have an OCI card?
If an NPS subscriber has renounced their Indian citizenship and hasn’t received or applied for an OCI card, they are not eligible to hold an NPS account.
A recent circular mandated that all NPS subscribers who have validly renounced their Indian citizenship and do not hold an OCI card will have their PRAN/NPS account closed, and “the entire accumulated pension wealth may be transferred to a Non-Resident Ordinary (NRO) account.”
Explains Rajesh Khandagale, SVP-NPS, KFin Technologies, “The subscriber will have to submit an application for closure of his/her NPS account along with an undertaking stating that he/she has renounced his/her Indian citizenship and does not hold an OCI card. They should also attach a valid certificate of renunciation of Indian citizenship/surrender certificate/cancelled Indian passport issued by a competent authority.”
Note that the total accumulated pension wealth of the subscriber in the PRAN shall be transferred only to the NRO account of the subscriber, in accordance with the FEMA guidelines issued by the RBI.
According to RBI guidelines, balances in an NRO account of NRIs (which includes OCIs) are remittable up to $1 million per financial year (April-March) along with their other eligible assets, as per Foreign Exchange Management (Remittance of Assets) Regulations, 2016. Fund transfers from NRO to NRE accounts also need to be within this limit.
OCI cardholders can stay for indefinite periods in India without having to apply for a visa every single time, since having an OCI card grants them a multiple-entry lifelong visa for visiting India. In case they wish to stay here for extended periods, or for as long as they want, OCI cardholders can voluntarily open an NPS account “applicable to resident Indians,” according to NSDL. However, note that OCIs are not permitted to open NPS Tier-II accounts.
Read on to know what documents you need to open an NPS account as an OCI cardholder and steps to close it in case you have acquired foreign citizenship and have not received their OCI card.
Can OCI cardholders open and hold NPS accounts?
Yes, all OCI cardholders aged between 18 and 70 years are eligible to open an NPS account on either a repatriation or non-repatriation basis. Explains CA Ashish Niraj, Partner, ASN & Company Chartered Accountants, “For OCIs, both repatriation and non-repatriation basis options are available in NPS. Repatriation basis means that the proceeds can be taken back to the investor’s home country. Non-repatriation basis means that proceeds should remain in India and cannot be taken back by the investor.
This means that OCIs have the choice to either remit or send their lump-sum withdrawal from NPS or their monthly pension received from India to the country of which they now hold citizenship, or not do so, i.e., not transfer back these funds to that country.
In NPS, subscribers can partially withdraw from tier-1 accounts for specific purposes, and such partial withdrawal is tax-free. For lump-sum withdrawal, a maximum of 60% of total corpus is allowed, which will also be tax-free
To open an NPS account with NSDL using an Aadhaar or PAN card, OCIs will have to provide a scanned copy of their OCI card, proof of their foreign address, and their scanned signatures, according to the NSDL website.
Applicants are also required to provide the details of NRE/NRO accounts only, along with a cancelled check/copy of bank passbook/bank statement/bank certificate/letter from the bank containing the applicant’s name, bank name, bank account number, and IFS/SWIFT code, per the NSDL site.
Which account can OCIs use for contributing to NPS?
Note that NPS contributions can only be made through an OCI cardholder’s NRE (Non-Resident External) or NRO (Non-Resident Ordinary) account. However, in case the OCI NPS subscriber wishes to repatriate, or send back, their funds, they should take care to make their NPS contributions only via their NRE a/c. This is because only NRE, and not NRO a/cs allow individuals to remit back funds to their country of residence at any time, without any limits. As for annuities, according to the NDSL website, “Annuity payable by ASPs (annuity service provider) to NRIs and OCIs will be taxed at source, at rates applicable as per the DTAA (Double Taxation Avoidance Agreements) of the country where the annuitant resides”,
Niraj adds, saying that while TDS will be applicable on pension received from annuity, subscribers can take advantage of DTAA in their country if there is a DTAA with that country. “Since in NPS, the minimum rate of return is higher compared to normal saving instruments, OCIs, for whom this avenue was opened in 2019, should explore investing in it,” he adds.
Can I hold an NPS account if I don’t have an OCI card?
If an NPS subscriber has renounced their Indian citizenship and hasn’t received or applied for an OCI card, they are not eligible to hold an NPS account. A recent circular mandated that all NPS subscribers who have validly renounced their Indian citizenship and do not hold an OCI card will have their PRAN/NPS account closed, and “the entire accumulated pension wealth may be transferred to a Non-Resident Ordinary (NRO) account.”
Explains Rajesh Khandagale, SVP-NPS, KFin Technologies, “The subscriber will have to submit an application for closure of his/her NPS account along with an undertaking stating that he/she has renounced his/her Indian citizenship and does not hold an OCI card. They should also attach a valid certificate of renunciation of Indian citizenship/surrender certificate/cancelled Indian passport issued by a competent authority.”
Note that the total accumulated pension wealth of the subscriber in the PRAN shall be transferred only to the NRO account of the subscriber, in accordance with the FEMA guidelines issued by the RBI.
According to RBI guidelines, balances in an NRO account of NRIs (which includes OCIs) are remittable up to $1 million per financial year (April-March) along with their other eligible assets, as per Foreign Exchange Management (Remittance of Assets) Regulations, 2016. Fund transfers from NRO to NRE accounts also need to be within this limit.
