The National Pension Scheme (NPS) or the National Pension System was launched by the Pension Fund Regulatory and Development Authority (PFRDA) to provide old-age financial security to Indian citizens. One can open an NPS account.
In this scheme, the money collected from the clients is invested in various equity and debt securities, which give long-term returns. This investment portfolio is managed by a fund manager registered with ‘Pension Fund Regulatory and Development Authority (PFRDA)’. Under this scheme, if the investor feels that the performance of the fund is not at par with the performance of the market or any other benchmark, then he can change his fund house.
After three years of opening an NPS account, up to 25% of your investment can be withdrawn from this account for specific purposes like buying a house, education of children, marriage.
Features of NPS Account
- There is no tax on 40% of the amount in NPS, while the remaining 60% is taxable.
- At least 40 percent of the amount should be used to buy the annuity.
- The amount used to buy an annuity is not taxed.
- Tax is applicable on lump sum withdrawal.
- If you withdraw 40 per cent of the amount and buy an annuity from the remaining 60 per cent, the tax will not be applicable.
- Pension earned from annuity will be taxed as per the slab of the account holder.
- Earlier the total tax exemption in NPS was Rs 1.5 lakh per annum, which has been increased to Rs 2 lakh per annum under Section 80 (C) of the IT Act. In terms of tax savings, after Equity Linked Saving Schemes (ELSS) NPS is considered to be the second best option.
Types of NPS Account
There are two types of NPS accounts: Tier 1 and Tier 2
NPS Tier 1 Account: This is a mandatory NPS account. The investment made in it is tax-exempt under section 80C. While the normal cumulative 80C benefit is only up to Rs 1.5 lakh, if you invest in a Tier 1 NPS account So there is an additional tax exemption of Rs 50,000. However, there are some restrictions imposed on withdrawing money from this account.
NPS Tier 2 Account: Tier 2 is an optional account available to NPS customers who have a Tier 1 account. Investments made in this account do not get any tax exemption. Moreover, investments in this account only can be done when your Tier 1 account is in good standing. Under the extant NPS rules, there is no restriction on the withdrawal of investments made in Tier 2 accounts.
How to open NPS account online
You can open an NPS account either online or offline. To open an NPS account online, visit the PFRDA website and follow the steps given below:-
- Click on ‘Registration’ and select ‘Register with Aadhar’ option.
- After entering the Aadhaar number, select the option ‘Generate OTP’.
- OTP will be sent to your registered mobile number.
- Enter your personal details, nomination and other bank related details along with the OTP.
- On successful submission of the application, you will be allotted your Permanent Retirement Allotment Number (PRAN).
- Your photo will be as shown in the ‘Photograph and Signature’ tab.
- After that click on ‘e-signature’ option. Once again OTP will be sent to your mobile number.
- Enter this OTP to verify the sign and make the payment.
How to open NPS account offline
To open an offline NPS account, you can get the registration form by visiting the registered Point of Presence (POP) under PFRDA. Explain that the Point of Presence is certain banks / financial institutions appointed by PFRDA to provide facilities to the customers under the National Pension Scheme.
Whether to subscribe to the NPS scheme or change the fund manager, all the services related to it under NPS are provided through these POPs. KYC documents including PAN card, address proof will have to be submitted.
Benefits of opening NPS account with Aadhaar
Earlier the process of opening an NPS account was a bit complicated. Applicants had to first request for the NPS form and then send it duly filled to the office of Pension Fund Regulatory and Development Authority (PFRDA). But after e-NPS, the process has become relatively easy. Now NPS account can be easily opened with just a few clicks. Some of the benefits of opening an NPS account with Aadhaar are as follows:
- The NPS form can be downloaded and submitted through the PFRDA portal of the Central Recordkeeping Agency (CRA).
- Applicants who have verified it through their Aadhaar number and with e-signature, there is no need to submit the hard copy.
- The e-signature of the applicant is verified through an OTP sent to his mobile number registered with Aadhaar. This saves time, money on both the parties, as well as less effort and paperwork is also not required.
- Applicants can visit the nearest POP for any assistance while filling the online NPS form. Almost every bank, which is registered with NPS, acts as a POP.
- All POPs charge a minimum fee for providing e-signature services. This fee cannot exceed a maximum of Rs.5 + GST.
How to login to NPS account
You can log in to your NPS account through the NSDL website. For this, by going to the home page, navigate to the Login menu on the top right side of the page. If you are an individual NPS subscriber, click on the Subscribers- NPS link.
Subscribers- On clicking on the NPS Regular link, you will be redirected to the NPS login page. On this page, you can log in using your Permanent Retirement Account Number (PRAN) and Password.
How to check NPS account statement online
For this, you have to first log in to your NPS account. After that, you can see all the statements related to it, including all your transactions (Tier 1 and Tier 2 deposits/withdrawals) and also your holdings under the NPS scheme. NPS account statement can be downloaded from the ‘Transaction Statement’ tab which also contains your holding and transaction statement.
Apart from downloading the NPS account statement, you will also be sent a digital copy of your Tier 1 and Tier 2 account holdings on the registered email, which contains all the transaction details for a given period. CRA Your NPS Statement of Transactions once in a year ( SOT) printed copies of
How to check NPS account balance
Checking your NPS account balance is quite easy. You can check your account balance online through two options: by logging into the web interface of your NPS account, or by using the NPS app on Android or iOS. You will need your PRAN and login password for the process. After logging in you can easily check your NPS account balance.
How to close your NPS account
You can close your NPS account only in case of retirement, death, or premature exit from the pension scheme. There are different NPS withdrawal forms for different cases along with which you need to submit some important supporting documents. The major NPS withdrawal forms are given below:
For closure of your NPS account, the completed form(s) along with the required documents needs to be submitted to the relevant authority. For those who manage their NPS account online, there is an alternative procedure to close it is also
Now a Claim ID is generated to track the status of the request in each case, irrespective of the reason for closing your account. However, it should be noted that in most cases the entire amount deposited in the NPS Tier 1 account cannot be withdrawn; But it is possible in Tier 2. In the case of NPS Tier 1, it is mandatory to convert a part of the amount into an annuity, in addition to the applicable lump-sum withdrawal.
How to deposit money in NPS account online
You can deposit money online in an NPS account in two ways:-
- through the NPS Website
- Through NPS Mobile Application
In both the options, consumers can deposit money in Tier 1 or Tier 2 accounts using net banking, debit card, or credit card.
How to unfreeze your NPS account
If you have not made the minimum contribution in Tier 1 (Rs 1000 per annum) in any financial year, your NPS account may get frozen. You can unfreeze it either online or offline in the current financial year by paying a fine of Rs 500. This penalty is a minimum of Rs. To be filled in addition to the mandatory contribution of Rs 1000 to be made in Tier 1.
To unfreeze your NPS account offline, you need to fill and submit the NCIS (NPS Contribution Instruction Slip) to one of the registered POP-SPs (Point of Presence – Service Provider). POP-SPs on behalf of the National Pension Scheme can receive payments from NPS subscribers. The key information that needs to be filled in NCIS includes PRAN, payment details (cheque/DD number). In case you are making offline payment to unfreeze/reactivate the NPS account, then the check/DD deposited with NCIS should be in favor of “POP <POP Name> Collection Account – NPS Trust”.
You can also opt for online re-activation through online payment using net banking and debit card. All you have to do is sign in to your online NPS account and pay a penalty of Rs 500 to unfreeze your NPS Tier 1 and Tier 2 accounts online. However, at the same time, you can also deposit a minimum of Rs 1,000 in the NPS Tier 1 account for the current financial year. Make sure to also contribute Rs.