National Pension System: These NPS subscribers have to pay TDS on annuity, PFRDA clarifies

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Updated: December 24, 2019 9:42:27 AM

NPS TDS Deduction: Annuity payable by the Annuity Service Providers (ASPs) to NRIs and OCIs will be taxed at source in accordance with the rates applicable as per the Double Taxation Avoidance Agreement (DTAA) of the country where they reside.

NPS TDS DeductionNRIs, OCIs to pay TDS on annuity payable to them.

National Pension System (NPS) TDS Deduction: The Pension Fund Regulatory Authority of India has said that the annuity payable by the Annuity Service Providers (ASPs) to NRIs and OCIs will be taxed at source in accordance with the rates applicable as per the Double Taxation Avoidance Agreement (DTAA) of the country where the NRI or OCI resides. This year, the regulator allowed Overseas Citizen of India (OCI) to enrol in the NPS at par with the Non-Resident Indians (NRI).

In a circular dated December 17, 2019, the PFRDA said: “Based on the communication received from Insurance Regulatory and Development Authority of India (IRDAI), it is hereby clarified that Annuity payable by ASPs to NRIs and OCIs will be taxed at source, at rates applicable as per the DTAA (Double Taxation Avoidance Agreements) of the country where the annuitant resides.

The PFRDA has directed the intermediaries including Annuity Service Providers to display/convey to the prospective and existing subscribers that “Annuitanties payable to NRI/OCI are subject to TDS’ and repatriation of the corpus, if any will be subject to applicable laws and regulatory provisions of IRDAI/PFRDA/RBI” in their publicity materials including websites, brochures and communications.

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NPS for OCIs

The PFRDA had allowed citizens of other countries, who at some point of time were Indian citizens, to invest in the NPS in October at par with NRIs. The any individual having an OCI card can open Tier I NPS account.

Both NRIs and OCIs are not allowed to open the Tier II NPS account.

In 2016, the NRIs were allowed to invest in NPS online through eNPS. Before this, they were allowed to join NPS only through offline mode.

NPS is a contributory pension system in which contributions by subscribers are collected, invested and accumulated in their accounts. The final return under the scheme is subject to the performance of the funds in which the money is invested by the fund managers.

This month the PFRDA recommended the government to allow systematic withdrawal plans by subscribers from the NPS instead of annuities. The regulator also said that it is in favour of increasing the deduction from Rs 50,000 to Rs 1 lakh under Section 80 CCD (1B) in the NPS.

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