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Pension Plans for NRIs

People migrate to foreign countries seeking better career options and remuneration. Some secure citizenship and permanently settle abroad. Others plan to spend their retired life in India. Pension plans for NRI cater to non-resident Indians investing in India to maintain their financial status and manage expenses upon returning to India for good. ...Read More

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Pension Schemes and Retirement Plans

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Pension Plans for NRIs

What are Pension Plans for NRIs?

The pension plan for NRI is a financial instrument that enables saving during your employment with small contributions to accumulate over a period and create a retirement corpus. This scheme is a government-backed scheme introduced in 2004 for government employees and later extended to other sectors, including NRIs.
 

During the accumulation phase, you can make a defined contribution that can be withdrawn on maturity. On maturity, you can withdraw a part of the amount and purchase an annuity plan for the remaining portion. You can get a regular income from the annuity plan either for a desired period or throughout your life. This is the vesting phase. The term of the pension policy ranges from 10 years to 30 years.

Best NRI Pension Plans in India by HDFC Life

Types of Pension Plans Available for NRIs

There are various pension plans available to suit individual preferences. NRIs are eligible to invest in all the plans. You can choose from the following types of plans:

Benefits of Pension Plans for NRIs

The benefits of pension plans for NRI abound. They are:

Flexibility In Contribution

Flexibility In Contribution

The pension plans for NRI provide flexibility in contribution options. You can choose the amount and frequency depending on your financial and employment status. The premium payments can be done monthly, quarterly, half-yearly, or yearly. You can customise the plan according to your budget and financial goals.

Steady Income

Steady Income

There are various types of pension plans for NRI. Be it annuity plans, NPS, ULIPs, or life insurance policies, you are guaranteed a steady income post-retirement. You can be financially independent during the golden years of your life.

Repatriation of Funds

Repatriation

Most pension plans for NRI in India including government schemes like NPS for NRI, permit repatriation of the retirement funds i.e., you can have the funds transferred back to the country of residence. This feature provides easy access to funds regardless of where you intend to spend your retired life.

Tax Benefits

Tax Benefits

Investments under the various pension plans for NRI in India are eligible for tax benefits under Section 80CCC of the Income Tax Act 1961, for investments up to Rs 1.50 lakhs. This feature substantially reduces the tax liability.

Diverse Investment Options

Diverse Investment Options

Several pension plans for NRI provide diverse investment options to align with your risk tolerance levels and financial goals. This helps to optimise the returns and create significant wealth. 

View All Benefits

Eligibility Criteria for NRIs

To invest in pension plans for NRI you have to meet the eligibility criteria specified under individual plans. They are:

 

Age Criteria

Age Criteria

The entry age for pension plans for NRIs is as stipulated for resident Indians i.e., 18. Some pension plans like NPS for NRIs have an upper age limit of up to 60 years with the option to continue till 70 years. The starting age for annuity plans is 30 years to 60 years. The age requirements may vary depending on the pension scheme and the associated regulations set by the PFRDA (Pension Fund Regulatory and Development Authority).

Residency status

Residency status

To invest in an NRI pension plan, one must have spent less than 182 days in India in a financial year or be abroad for work. NRIs can invest in annuity plans, ULIPs, Life Insurance, NPS, etc., using NRE or NRO accounts, adhering to RBI guidelines for smooth transactions.

Documentation Requirements

Documentation Requirements

NRIs should adhere to specific documentation requirements for investing in the best pension plan for NRI. The necessary documents include the following:

  • Age Proof: Documents such as birth certificate and passport
  • Identity Proof and Address: A passport copy is required along with latest entry seal. Some companies even ask for valid documents such as national identity cards or resident card
  • Income Proof: Bank statements, salary slips, and tax documents from the country you are residing in act as income proof
  • Medical History: Considering your insurance company’s policy, it is mandatory to disclose your medical history through medical tests
  • Scanned passport copy
  • OCI or PIO card as per KYC norms
  • A copy of the PAN card or Declaration in lieu of PAN card
  • A foreign residency supplementary questionnaire
  • FATCA annexure

Tax Implications for NRIs Investing in Pension Plans

The nature of investment and the resident country’s tax treaty with India are the two factors that determine the tax implication for NRIs investing in pension plans.
 

If they invest in NPS for NRIs, the contributions made to this pension plan are eligible for tax deductions under Section 80CCC# of the Income Tax Act 1961. An additional Rs. A claim of 50,000/- is possible under Section 80CCD (1B)# for NPS contributions.
 

Withdrawal of 60% of the NPS corpus on maturity is tax-free. The rest of the funds should be invested in an annuity which is taxable as per the annuitant’s income tax slab. The tax treatment may vary depending on the pension plan. To avoid double taxation, NRIs can avail the benefit of double taxation agreements (DTAAs) between India and their resident country.
The pension plans for NRIs provide regular income streams for financial independence during retired life. However, understanding the tax implications before investing is suggested. Take the help of a tax advisor to steer through tax complexities.

How to Invest in Pension Plans as an NRI?

Retirement and pension are a general topic of discussion. While you compare and decide on an investment, you should also be aware of the investment process. 

1

Step-by-Step Guide:

Here is a step-by-step guide that you can follow:
 

  • Study and compare the various pension plans for NRIs. Consider the reputation of the pension provider, past performance, and benefits such as life cover.
  • Collect all the necessary documents.
  • Access the official website of the pension plan provider you have chosen.
  • Fill out the online application form.
  • Upload the prescribed documents.
  • Make the initial contribution as required by the scheme through any of the payment gateways available.
  • The pension provider will review the application and the documents provided and do the needful.
     

You can also visit the banks/financial institutions offering the pension plans, collect the application form, complete it and submit it along with the supporting documents.

 

Online methods allow investing in the pension plan remotely from any corner of the world with just an internet connection. You can get real-time updates and monitor and modify investments from the convenience of your home through digital platforms. Whereas, offline methods involve visiting the banks/financial institutions that offer pension plans and submitting the application and the documents personally. While online methods have their advantages, less tech-savvy people prefer offline methods.

 

The documents submitted for pension plans for NRI are a valid passport, utility bills or rental agreements (overseas address proof), Visa or work permit (for NRI status proof), bank statement of NRE/NRO accounts, photograph, signature, and a cancelled cheque.

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FAQs on Pension Plans for NRIs

1 Can NRIs take pension plans in India?

Yes. NRIs can take pension plans in India. They should be between 18 years to 60 years old while opening the account. They should have an NRE or NRO account to route the contributions to the pension plans.

2 Can NRI open a National Pension Scheme?

Yes. An NRI who is between 18 years to 60 years old can open a National Pension Scheme account. The initial and further contributions to the account should come from an NRE or NRO account.

3 Is pension taxable for NRIs?

Annuity payments are taxable for NRIs as per the NRI's income tax slabs. To avoid double taxation they can avail the benefit of DTAAs i.e., double taxation avoidance agreement. Seeking a tax advisor’s assistance will help steer through tax complications.

4 What is the best pension plan for NRIs?

The best pension plan for NRIs depends on the age, financial ability, goals, and risk appetite. However, various pension plans like NPS, Annuity Plans, Fixed Deposits, ULIPs, and Life Insurance Policies are available to choose from.

5 How can NRIs choose the right pension plan?

NRIs can choose the right pension plan by considering factors like the retirement corpus required (depending on the economic conditions of the country where they spend their retired life), inflation, exchange rate, and tax benefits.

6 Can NRIs withdraw their pension plan before maturity?

Yes. NRIs can withdraw their pension plan partially before maturity for specific purposes like marriage, education, house construction, and medical emergencies.  This is allowed after completion of three years from the account opening date. They can withdraw 25% of the corpus for a maximum of three times during the plan term. A gap of five years has to be maintained between each withdrawal.

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Disclaimer

1. Provided all due premiums have been paid and the policy is in force.

2 Amount of guaranteed income will depend upon premiums paid subject to applicable terms and conditions.

3. Provided all due premiums have been paid.

4. This applies to Income Variant, whereby guaranteed income is paid on survival of Life Assured during the policy term, provided all due Premium(s) are paid during the premium payment term.

5. This feature is available in select products under the savings category. Please read the product brochure of your selected product to know the details.

6. In the case of Joint Life annuities the payout continues till either of the lives chosen in the policy is alive.

8. The age mentioned is the age as per the last birthday.

12. Available under Level Cover with Capital Guarantee and Decreasing Cover with Capital Guarantee plan options

17. Quantum of benefits is guaranteed irrespective of the experience.

#Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions.Tax Laws are subject to change from time to time.The customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law.

ARN - MC/06/24/12533