Mandatory Annuity on NPS Account Closure: Insights for Non-Resident Indians

As a Non-Resident Indian (NRI) living outside India and with the acquisition of foreign citizenship, certain aspects of your National Pension System (NPS) account might seem uncertain. This article aims to provide clarity regarding the mandatory annuity requirement and the options available for withdrawing NPS funds.

Understanding the NPS Withdrawal Processes

The National Pension System (NPS) follows strict rules for account closure, and these rules are particularly relevant for NRIs. The NPS offers two primary withdrawal options: a complete 100% withdrawal and an annuity purchase.

Complete 100% Withdrawal

In case your total corpus in the NPS account is less than or equal to Rs. 2.5 lakh as of the date you initiate the online withdrawal request, you are entitled to a complete 100% withdrawal. This option allows you to retrieve the full amount in your NPS account without the need for an annuity purchase.

Mandatory Annuity Purchase

However, if your total corpus exceeds Rs. 2.5 lakh, you must purchase an annuity. The annuity serves as a regular pension stream, ensuring that you receive a steady income post-60 years, which is a mandatory requirement for NPS account holders.

Pre-Mature Exit

A pre-mature exit from the National Pension Scheme occurs when you exit the scheme before reaching the age of superannuation (60 years). In such a scenario, at least 80% of your accumulated pension wealth must be utilized for the purchase of an annuity. The remaining 20% can be taken as a lump sum.

It is important to note that you are allowed to exit the NPS scheme only after having completed at least 10 years of investment.

Rules and Regulations for Contributions

The Pension Fund Regulatory and Development Authority (PFRDA) has recently extended the option for NRI-NPS subscribers to contribute to their NPS accounts. These contributions can be made from funds in their Non-Resident Ordinary (NRO) or Non-Resident External (NRE) accounts through D-Remit.

When it comes to withdrawing the proceeds from your NPS account, these funds will be credited to your NRO or NRE account. The repatriation process will be conducted according to the applicable Foreign Exchange Management Act (FEMA) guidelines.

Conclusion

For NRIs with foreign citizenship, understanding the NPS withdrawal processes and annuity requirements is crucial. Whether you opt for a complete 100% withdrawal or choose to invest in an annuity, it is important to adhere to the rules set by the PFRDA to ensure a seamless and compliant closure of your NPS account.

For more detailed information, please refer to the official NSDL FAQ and PFRDA guidelines. These resources provide comprehensive insights into the various aspects of the NPS for NRIs.