How to open an NPS account?
National Pension Scheme (NPS) is one of the popular tax-saving retirement tools among investors since its inception. An investment in NPS comes with multiple advantages, with the most important one being a steady source of pension income in your post-retirement phase of life.
Knowing the basics of NPS
- You can start an investment in NPS if you are an Indian citizen (resident/non-resident) between 18 to 65 years of age.
- The minimum contribution that you must make to continue your NPS investment is Rs. 1000 annually.
- The funds you invest in NPS are spread across Equities, Government Securities, Corporate Debt, and Alternative Investment Funds to offer maximum returns and diversification benefits.
- NPS offers you the flexibility to decide how to allocate your funds across the asset categories depending on your risk tolerance limit and growth goals. The two strategies to approach NPS asset allocation are Active choice and Auto Choice. Click here to know more about these two choices in detail.
- NPS is a Voluntary Retirement Scheme (VRS). Hence there is no mandate (besides the minimum yearly contribution) on the maximum contribution amount, date of payment, and frequency in NPS. You can modify the amount as you wish and pay it anytime during the year, as many times as you want.
- There are two types of accounts in NPS –
- Tier 1 Account -If you want to start your investment in NPS, you need to have this account mandatorily. The funds you invest in this account will give you tax benefits on up to Rs 2 lakhs under section 80C and section 80CCD (1B). If you are a salaried team member, there are additional tax benefits that you can avail of under section 80CCD (2). The downside of this account is its illiquidity. There are caps on the withdrawal amount and the tenure after which you can withdraw from this account. Click here to know about the tax benefits of an NPS investment in detail.
- Tier 2 Account - You can only have a Tier 2 account if you have a Tier 1 account in NPS. This account does not offer any tax benefits on contributions or withdrawals. It also doesn’t enforce any restriction if you want to withdraw the corpus at any given time into your investment. However, your eligibility for a Tier 2 account depends on your conduct of the Tier 1 account.
- As per the NPS maturity benefits, you receive a 60% lump sum corpus when you retire (turn 60 years old). You have to buy annuities from the remaining 40% for receiving a regular pension income for the rest of your life.
How to Open an NPS Account?
You can open an NPS account through the online process or offline process. The online process is relatively quicker and more straightforward as it can be done from your place of comfort in a paperless manner. Here are the broad steps to open your NPS account through both routes,
- You can start the online process by visiting the Pension Fund Regulatory and Development Authority (PFRDA) website, i.e. pfrda.org.in or e-NPS portal, i.e. enps.nsdl.com.
- Go to the Registration tab and click on ‘Register with Aadhar’.
- Once you enter your Aadhar Number on the landing page, you will receive an OTP on your registered mobile number. Submit it with personal information, bank details, nominee details, etc., to complete your registration process.
- You can alternately register your account through a PAN card, too, if you don’t want to use your Aadhar card. This option requires you to get your verification done from your existing financial intermediary, such as your current banking partner or registered broker.
- You will receive your Permanent Retirement Account Number (PRAN) on successful submission.
- Your photograph will be auto-picked from your Aadhar card. You can then complete the e-signature verification process through the OTP submission. You will also need to upload an image of your cancelled cheque here.
- Make the payment for your initial contribution (minimum Rs. 500 without taxes) towards the scheme and the registration fees to seal the deal.
- PFRDA has set up PoP (Point of Presence) such as banks, registered brokers such as ICICI Direct, etc. across the country for facilitating the offline process. Take the physical subscription form from these centers.
- Submit the form duly along with the mandatory KYC documents. Pay the one-time registration charges of Rs. 125.
- Procure your PRAN and account password from the PoP by making your initial contribution towards the scheme.
The advent of superior technology has made maintaining investments easy-peasy. Once you have started your NPS investment, you can continue operating it by logging in to your account and making your payments online on the applicable portals or through the NPS mobile app. These platforms can also help you with your NPS corpus details, etc.
Disclaimer – ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. PFRDA registration numbers: POP no -05092018. We are distributors of National Pension Scheme. Please note, National Pension Scheme related services are not Exchange traded products and I-Sec is just acting as distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.