Understanding the National Pension System (NPS) for OCIs
Following a policy change in 2019, Overseas Citizens of India (OCI) became eligible to subscribe to the National Pension System (NPS). This voluntary scheme allows OCIs to save for retirement in India, similar to Non-Resident Indians (NRIs).
Eligibility Criteria
To enroll in NPS, an OCI must be between 18 and 70 years old and meet KYC requirements. Required documents include a PAN card, OCI card, overseas address proof, and details of an NRE or NRO bank account.
Account Types for OCIs
OCI subscribers can only open a Tier I account, which is for mandatory retirement savings with strict withdrawal rules. The voluntary Tier II account is not available for OCIs or NRIs.
Contribution and Investment Options
Contributions must be made through an NRE or NRO bank account. OCIs can choose their investments through:
- Active Choice: The subscriber allocates funds across asset classes like equities and government securities within limits.
- Auto Choice: Investments are managed automatically based on age.
For more information on registration, visit the National Portal of India.
Rules for Withdrawal and Taxation
NPS exit and withdrawal rules for OCIs are similar to resident Indians. At age 60, up to 60% of the corpus can be withdrawn as a tax-free lump sum, while the remaining 40% must be used to buy an annuity for regular pension. Premature exit after 10 years requires 80% to be annuitized and 20% can be a lump sum. Annuity payments are subject to Indian TDS, with the rate depending on the DTAA between India and the OCI's country of residence. Repatriation of funds depends on whether contributions were made from an NRE (repatriable) or NRO (non-repatriable) account.
Comparing NPS with Other Investment Options for OCIs
Consider how NPS compares to NRE and NRO bank accounts:
| Feature | NPS for OCI | NRE Account | NRO Account |
|---|---|---|---|
| Purpose | Long-term retirement savings with market-linked returns | Holding foreign currency funds earned abroad | Managing Indian-sourced income (e.g., rent, interest) |
| Repatriability | Depends on the bank account used (Repatriable/Non-repatriable) | Fully repatriable without limit | Repatriation capped at $1 million per financial year |
| Eligibility | OCI cardholders (18-70 years) | Indian citizens and OCIs residing abroad | Indian citizens and OCIs residing abroad |
| Investment | Regulated, professional investment in equities, corporate bonds, etc. | Primarily a savings/current account; funds can be used for other investments | Primarily a savings/current account; funds can be used for other investments |
| Taxation | Tax benefits on contributions; lump sum withdrawal at retirement is tax-free; annuity is taxable | Interest earned is tax-exempt in India | Interest earned is taxable in India |
Conclusion: A Structured Path to Senior Financial Security
Yes, an OCI card holder can get a pension in India by voluntarily enrolling in the National Pension System (NPS). This government-backed scheme provides a robust framework for building a retirement corpus, offering diverse investment options and tax benefits. By understanding the specific eligibility, account rules (Tier I only), and withdrawal procedures, OCIs can effectively plan and secure their financial future in India. It is essential for OCIs to consult with a financial advisor to navigate the intricacies of contributions, repatriation, and tax implications based on their individual circumstances and country of residence.
