Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) can open NPS accounts under specific eligibility criteria. According to reports from Mint and Business Standard, eligible investors must be Indian citizens residing abroad or OCIs, with age limits ranging from 18 to 85 years (as per PFRDA's latest guidelines). NRIs must maintain either an NRE or NRO bank account and complete mandatory KYC requirements including submission of a valid Indian passport, address proof, and prescribed documents. The Tier-I account is mandatory while Tier-II accounts are not permitted for NRIs, as reported by Mint and Business Standard. NRIs and OCIs can open accounts under the All Citizen Model with documents such as PAN, recent photograph, Indian passport (for NRIs) or OCI card (for OCIs), address proof, and NRE or NRO bank account. Contributions can be made through permitted banking and online channels.
NRIs can claim significant tax deductions on NPS contributions under the old tax regime, with the biggest benefit available to those who continue to have taxable income in India and choose the old tax regime. As reported by Mint and Business Standard, eligible NRIs can deduct up to ₹1.5 lakh under Section 80C and an additional ₹50,000 under Section 80CCD(1B). This allows NRIs to reduce their taxable income in India by up to ₹2 lakh annually, particularly on income sources such as rent, capital gains, or other taxable sources. However, this benefit has limited relevance to NRIs who have no taxable income in India, as NPS contributions cannot simply be used to reduce tax payable in another country. The new tax regime is the default regime, while eligible taxpayers can opt for the old regime, with most Chapter VI-A deductions, including NPS deductions, not available under the new regime.
The NPS follows an EEE structure under Indian income tax laws, offering tax-free benefits upon retirement. According to Mint and Business Standard, PFRDA's withdrawal rules for the All Citizen Model were changed in December 2025, with subscribers now able to generally take up to 80% of the accumulated pension wealth as a lump sum and must use at least 20% for an annuity. For normal exit, this is different from the older 60:40 framework that many investors may still be familiar with. For premature exit, the broad rule remains much stricter: up to 20% can be taken as a lump sum, while at least 80% must be used to buy an annuity, subject to applicable corpus thresholds and rules. For NRIs exiting before age 60, only 20% of the entire corpus can be withdrawn, while 80% must be invested in an annuity. Partial withdrawals of up to 25% are permitted after three years for specific needs including children's education, medical treatment, or marriage expenses, which can be particularly useful for NRIs as it keeps the retirement corpus ring-fenced.
In case of the subscriber's death, the entire NPS corpus is transferred to the nominee and remains exempt from tax in India. As reported by Mint and Business Standard, NRIs should consider the tax implications of their country of residence, as annuity income or associated withdrawals may have different tax implications abroad depending on the taxation rules and regulations of the respective country. The portion used to buy an annuity does not become tax-free merely because it came from NPS - once the annuity starts paying a pension, that income is taxable in India according to applicable tax rules. For an NRI, the final tax impact can also depend on the tax rules of the country where the person is resident and the relevant Double Taxation Avoidance Agreement (DTAA). The NPS provides a disciplined approach to retirement planning while ensuring financial security across borders for eligible NRIs.
