How Can You Open A NPS Account?

What is NPS? NPS full form is National Pension Systems. It is a contribution-based pension scheme developed by the Government of India with the goal of providing an old age retirement fund to all people who want to participate. The PFRDA is in charge of regulating and managing it (Pension Fund Regulatory and Development Authority). Although it was initially limited to government employees, it was later expanded to include non-government residents in 2009.

In addition to being a market-linked product, NPS provides returns based on the fund's performance. The scheme's main goal is to provide all Indian citizens with an appealing long-term savings option for planning for retirement through safe and appropriate market-based returns. All Indian citizens between the ages of 18 and 65 can establish an account. To understand more about NPS, read on.

Types Of NPS Account

Following are the types of account that an individual can open under NPS -

1. Tier 1 Account

A Tier I account is a permanent retirement account that does not allow withdrawals. Prior to 2011, it had a lock-in term that lasted until the respective individual became 60 years old. However, in 2011, the regulating authority, the PFRDA, made a few amendments. The respective individuals would be entitled for premature withdrawals from the service after the completion of 15 years, according to their new regulations.

Premature withdrawals are made in the form of repayable advances, which is remarkable. After 25 years of service, one can additionally withdraw up to 50% of their contribution. These withdrawals will aid individuals in dealing with a variety of situations requiring immediate financial support, such as critical illness.

2. Tier 2 Account

NPs Tier 2 Account allows an individual to make limitless withdrawals from their respective accounts. It functions similarly as a savings account. The main difference is that withdrawing money from this account is a little more difficult than withdrawing money from a savings account.

However, it's also crucial to note that an NPS Tier II account may only be started if a Tier I account is currently active.

An NPS Tier I account requires a monthly commitment of Rs 500 and a yearly contribution of Rs 6000. A Tier II account, on the other hand, requires a minimum payment of Rs 1000, with a subsequent transaction fee of Rs 250.

Opening A NPS Account

An individual may simply start an NPS account online if they have a bank account in one of the 17 NSDL (National Securities Depository Ltd)-registered banks.
An individual may simply go on to the eNPS official website and apply for an online account if their PAN details are linked to their savings account.
Rest of the handling of the KYC and application processing will be done by the bank.
If an individual has an Aadhaar card, they may also open an e-NPS account. On February 17, 2016, the PFRDA (Pension Fund Regulatory Authority) certified Aadhaar as an e-KYC.
It must, however, be connected to an individual’s phone number and savings account number.
As for the verification process, an individual will always receive an OTP on their registered phone number.

Investing In NPS

Investing in NPS can provide a tax benefit under Section 80C of the Income Tax Act. If an individual invests in NPS combined with a variety of other tax-saving products such as PPF, ELSS, and life insurance, they may claim a maximum deduction of Rs.150,000. Furthermore, with Budget 2016 granting an extra benefit of Rs.50,000 to anyone investing in NPS under Section 80CCD(1b), the Pension Scheme has gained even greater traction among individual taxpayers.

Individuals who wish to register for an eNPS account but do not yet have their Aadhaar number and PAN number connected to their savings bank account will have to wait until the next financial year to invest in NPS. This is because, as the fiscal year draws to a close, the number of individuals looking to maximise their tax benefits has increased significantly. As a result, application processing takes around 15 to 20 days. An individual will have to wait until the end of the fiscal year to get their PRAN (Permanent Retirement Account Number).

Endnotes

An individual is also not allowed to shift their money between NPS funds at their leisure. The investment cannot be withdrawn for a minimum time period of 1 year. As a result, picking the right pension fund is really important.

Also Read: Planning To Purchase A Retirement Plan? Here's What You Must Know

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.