“Don't simply retire from something; have something to retire to.” – ...
Many non-resident Indians (NRI) choose to retire in India, despite the challenges of a better work environment, increased family commitments, and sophisticated life standards, investing in pension plans to sustain their financial condition and meet daily expenses.
What is a Pension Plan?
A pension plan is a financial instrument that allows long-term accumulation of retirement corpus, with the remaining fund invested in an annuity plan for regular income, with a policy duration ranging from 10 to 30 years.
Types of Pension Plans
Annuity plans:
Annuity plans are primarily preferred for immediate and deferred options, with immediate plans providing regular income immediately upon purchase and deferred plans providing income at a later date.
National Pension Scheme (NPS):
The National Pension Scheme (NPS) is a government pension scheme that helps you invest in a long-term retirement corpus invested in the equity or debt markets. You can withdraw 60% of the corpus and invest 40% in annuity.
Life insurance pension :
Life insurance pension plans offer life cover and retirement benefits tailored by providers to ensure a sum assured to families in the event of an unexpected death.
Important Pointers to Consider While Purchasing NRI Pension Plan
Now that we have briefly discussed pension plans and their types in India, we will know the important pointers to consider for the NRIs.
Your account in India as an NRI should exist as a Non-Resident Ordinary (NRO) account. Therefore, if your account is an existing India-based account, you should inform your pension plan provider and the corresponding bank that you are an NRI. They will convert it to the NRO account.
You should provide a life certificate from the Indian Embassy or the bank in the country where you are residing once every year in November.
The bank handling the pension plan for NRI will credit it to your NRO account.
How Should You Plan for Retirement as an NRI?
The article provides essential details on the official requirements for an NRI pension plan, along with some crucial factors to consider when investing in such plans.
Exchange Rate :
The exchange rate and money value fluctuations significantly affect retirement funds, requiring careful research and understanding of the prevailing rate changes over time.
Inflation :
When calculating your retirement corpus, consider the inflation rate to account for future real-world costs in your host country or India.
Retirement Corpus:
Estimate the retirement corpus based on host country preference and financial goals, considering economic conditions and living standards. Account for extra medical expenses and maintain living standards.
Taxation:
According to the Income Tax Act, 1961, you will qualify for a tax deduction benefit up to ₹1,50,000 for investments made in annuity pension plans from insurance providers under Section 80CCC, a subsection of Section 80C.
NPS investments offer a deduction benefit of up to ₹50,000, tax-free withdrawals, and regular income. NRIs must inquire about host country tax implications for future discrepancies.
In conclusion, pension plans are ideal investments for a peaceful future, especially for NRIs who plan to return to India post-travel. Consider factors like retirement corpus, inflation, exchange rate, and tax implications for better returns. Start early for longer policy terms.
Do you have your Individual Pension Plan for Life?
I have a company Pension Plan!
I dont have any Pension Plan !
I have a Life Insurance Pension Plan !
I have a PPF Account of myself!
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