National Pension Scheme is a retirement product introduced by the Government of India. The scheme falls under the jurisdiction of the Pension Fund Regulatory and Development Authority (PFRDA). NPS is a social security scheme made available for all citizens of India. Before we learn about opening the NPS account, let’s take a look at the key features of the plan.
Key features of the National Pension Scheme
- NPS is a voluntary, defined contribution- based pension product with a two-tier structure for investment.
- Tier I has a mandatory pension account with tax benefits available. Tier II is a flexible and optional investment account which allows you to park excess funds temporarily
- NPS account can be opened with a minimum investment of INR 500 at once and INR 1,000 per annum.
Who can open an account in the National Pension Scheme?
All Indian citizens between the age group of 18 years and 60 years can open an NPS account. The account opened can be operated anywhere in India through wide networks of Point of Presence (POPs). There are 54 empanelled POPs, list of which is available on NSDL- eNPS portal.
How to open an NPS account?
The NPS account can be opened through two modes – online mode and offline mode. Let’s take a look at the step-by-step procedure to open the NPS account in both the modes.
NPS account opening through online mode
All you need to have for subscribing NPS online is email ID, mobile number and an active bank account with net banking facility enabled. You can instantly open your NPS account online through PAN based registration. Your PAN card should be linked to a bank account. Following are the steps to follow for opening NPS online account:
Step 1: Log on to NSDL-eNPS portal and click on ‘National Pension System’ tab
Step 2: Click on ‘Registration’, the new registration page will open
Step 3: Choose appropriate options such as applicant type, applicant status and account type (Tier I only /Tier I&Tier II). Choose to register with Permanent Account Number (PAN), enter the PAN number and select your bank/POP to continue
Step 4: Fill in your personal details, family details and identity details
Step 5: Choose your pension fund manager out of many fund houses available in the list. Your contributions to NPS will be managed by the chosen fund manager
Step 6: Choose your preferred investment mode. There are two types of mode available –
- Auto mode – Equity allocation will automatically be rebalanced based your age
- Active mode – Investment mix is decided by you among different investment fund classes
Step 7: Provide details of nomination to whom the corpus should be paid in case of death
Step 8: Upload the relevant documents such as PAN card, Passport, Photographs and scanned signatures
Step 9: Make contributions to finish registration. Minimum contribution for Tier I account is INR 500 and Tier II is INR 1,000. Payment can be made through credit card/debit card/net banking. Once your payment is approved, PRAN (Permanent Retirement Account Number) will be allotted to you. Ensure to save the auto-generated filled registration form.
Step 10: Print the downloaded form, sign it, attach copies of relevant documents and mail it to Central Recordkeeping Agency (CRA) within 90 days to avoid freezing of NPS account
Step 11: PRAN kit including PRAN card and scheme document will be sent to your registered mailing address.
Once your PRAN is generated, you can start making your contribution to NPS online and build your retirement corpus.
NPS account opening through the offline mode:
Following are the steps to follow for opening NPS account through offline mode:
Step 1: Visit any of the POP (Points of Presence) empanelled with NSDL for National Pension Scheme. You can also choose a bank/financial institution listed as POP where you hold an account or have an existing relationship. POPs provide NPS account opening services through their network branches called POP service providers (POP-SP)
Step 2: Collect an application form for opening an NPS account. Fill in all the details carefully such as your personal details, nomination details, account type, asset allocation and pension fund manager selection etc
Step 3: Along with the signed and filled form, submit all the necessary KYC (Know Your Customer) documents.
Step 4: Once the documents and an application is submitted to POP, you will get a 17-digit receipt number
Step 5: Account opening may take about 20 days’ time. Once the account is opened, you will receive your Permanent Retirement Account Number (PRAN) kit containing the PRAN card and scheme details. With this, you can start your contributions into NPS account and start building wealth for your retirement future.
Documents required for opening NPS account:
Following are the documents required for opening NPS account:
- Identity proof – PAN card mandatory
- Proof of residence – Aadhaar card/Passport/Voter ID/Ration card/Driving licence/Telephone bills
- Passport size photograph
Frequently Asked Questions (FAQs)
- What is Permanent Retirement Account Number (PRAN) in NPS?
Permanent Retirement Account Number (PRAN) is a unique and portable 12-digit account number provided to each NPS subscriber.
- Can I subscribe for more than one NPS account?
No. Multiple accounts for one individual is not allowed under the National Pension System. With the option of portability, the requirement may not even arise.
- Is there any contribution from the government for Individual’s NPS account?
No. There will not be any contribution from government to NPS account.
- Can a change of pension fund manager be done later for NPS online account?
Once the NPS online account is opened, you can change the pension fund manager anytime. You can even change your scheme preference and an investment option.
- What are the tax benefits available under the NPS account?
Following are the tax benefits in NPS – under Tier I account
- Employee contribution is eligible for a tax deduction of up to 10% of salary (basic +dearness allowance) within the overall ceiling of INR 1.5 lakhs under Section 80CCE of the Income Tax Act.
- The employer contribution is exempted from income tax under Section 80CCD (2) of the Income Tax Act.
- NPS offers exclusive tax savings provisions with tax deduction on the contribution of INR 50,000 under section 80CCD (1B) of the Income Tax Act.