Overseas Citizens of India (OCI) will now be allowed to invest into NPS or National Pension Scheme Tier 1 scheme. "Considering the requests from different sections, the authority has decided to permit Overseas Citizen of India (OCI) to enroll in NPS at par with non-resident Indians (NRIs) subscribing to NPS," retirement fund body PFRDA said in a notification. However, the option of NPS Tier II account will not be available to NRI and OCI subscribers.
According to the Ministry of External Affairs website, "The Scheme (Overseas Citizenship of India Scheme) provides for registration as Overseas Citizen of India (OCI) of all Persons of Indian Origin (PIOs) who were citizens of India on 26th January, 1950 or there after or were eligible to become citizens of India on 26th January, 1950 except who is or had been a citizen of Pakistan, Bangladesh or such other country as the Central Government may, by notification in the Official Gazette, specify."
Experts have welcome the move to allow Overseas Citizens of India to invest in NPS. "Overseas Citizens of India (OCI) will now be allowed to invest into NPS-Tier 1 account which is already allowed for non-resident Indians. This is a welcome move for OCIs as there are many individuals of Indian origin who have taken up foreign citizenship while working overseas and may prefer to continue investing in India from their local income sources," says Alok Agrawal, partner at Deloitte India.
"Some OCIs have also returned to India permanently, while continuing to maintain their foreign citizenship. As these individuals did not retain India citizenship and therefore did not qualify as NRIs, they were not allowed to invest in NPS. With this relaxation, such OCIs will be able to take advantage of the NPS investment avenue and associated income tax benefits," he added.
However, repatriation of the accumulated savings/annuity from the NPS Tier-1 account to a bank account outside India will be governed by the relevant provisions of the Foreign Exchange Management Act, said Alok Agrawal of Deloitte India.
NPS is a defined contribution pension plan. Your money will be pooled in a pension fund. There are two accounts—Tier 1 account, the pension account, which gives tax benefit and is mandatory to open for NPS, and Tier II account, an optional account with withdrawal flexibility.
In May 2015, PFRDA had instructed Point of Presence (PoP) not to open NPS account for ineligible categories like Hindu Undivided Family, Overseas Citizen of India and Persons of India origin (PIO).