NPS, or National Pension Scheme, is a secured tool for investing your money and earning a pension from it. It offers several benefits for the subscribers, such as flexibility, security, tax savings, etc. Any working individual in India aged between 18 and 60 can open an NPS account. There are two types of NPS account opening processes – online and offline.
Here, you will learn about those processes of account opening for NPS.
How to open an NPS account?
Presently, There are two ways to open NPS account. Online from the official NPS portal or offline by visiting POP-SP bank branch physically.
Following are the steps to open NPS account:
Online process of NPS account opening
- First, enrol yourself for a National Pension Scheme account opening. So, click ‘Apply Now’ from the official website of National Pension System.
- Then, you can choose any CRA from these two — K-Fin Technologies Private Limited or NSDL e-governance Infrastructure LTD.
- After that, you will get an online form for NPS account opening. You have to fill out the required fields of this form.
- Next, you will get an acknowledgement number for your account opening (registration) process. You can complete the remaining part of the registration later. However, there is a term about the registration form, which mandates that it should be completed within the next 15 days based on the acknowledgement number.
- After completing the above-mentioned steps, you have to go through a KYC verification process. Again, you can complete KYC verification using any of the two methods — PAN-based or offline Aadhaar XML KYC.
- PAN-based KYC: For this type of KYC verification, the bank will take the details mentioned in your bank account.
- Offline Aadhar XML KYC: In this case, the bank will collect your details from the UIDAI database.
6. Then, share your details, such as bank, nominee and scheme details.
7. Next, upload your photograph, specimen signature, PAN copy and bank statement/cancelled cheque/passbook copy.
8. Now, you have to start your initial contribution, and the amount should be a minimum of ₹ 500. You will be directed to the payment gateway or net banking page of your bank.
9. After a successful payment, a 12-digit PRAN will be generated. Also, a PDF form will be generated based on the provided data. Later, you will receive the PRAN through SMS and your registered email address.
10. Finally, you have to complete the OTP-based confirmation or e-sign procedure. It ensures the online submission of the NPS account open registration form.
Note: This procedure is the same for all the banks, including the HDFC bank NPS account opening.
Offline NPS account opening process
- First, locate your Point of Presence – Service Provider (POP-SP). The POP-SP should be an authorised bank or bank branch that provides NPS services.
- Then, collect a PRAN application or NPS account opening form from that POP-SP.
- After that, fill up the form with the required details and sign it. Also, provide your KYC documents with the form.
- Then, make an initial contribution of a minimum of ₹ 500 and submit the application form. The subscriber should make their first contribution along with an instruction slip (NCIS) to provide the payment details.
- Your PRAN card will be sent to the CRA after the NSDL NPS account opening application submission. Also, the POP-SP will give you a receipt number during the time of registration.
Features and benefits of NPS
You will get the following features and benefits after completing the NPS Tier 1 account opening process:
Flexibility
NPS allows the subscribers to choose their contribution amount, frequency of investment, and pension fund manager. You can start your contribution in an NPS account with ₹ 500 and must deposit at least ₹ 1000 to keep your account activated.
High returns
Your money will be distributed to equities and different asset classes, after your contribution to the NPS account. As equities provide high returns, you can also expect a good return from your investment.
Regulation
The Pension Fund Regulatory and Development Authority of India regulates NPS. It governs several rules and security policies for NPS accounts. Thus, NPS becomes one of the safest investment options within the country.
Income
You will get 60% of the corpus during maturity when you will turn 60 years. For the remaining 40%, you have to purchase an annuity plan. Then, you will get a pension after retirement with the help of this annuity plan.
Tax saving
There are several tax-saving options for NPS Tier 1 accounts. Among them, the popular options are — tax exemption up to ₹ 50,000 under section 80CCD (1B) and a deduction of ₹ 1.5 lakhs under the 80CCD(1).
Things to keep in mind before making an NPS investment
Since you are planning to invest in NPS, you need to know to remember a few pointers to make a sound decision:
- You can open an NPS account in Tier 1 or Tier 2. Tier 1 account offers several tax benefits and partial withdrawal under some terms and conditions. Tier 2 accounts don’t offer any tax benefits but allow partial withdrawal without any restriction.
- NPS comes with two types of investment options — Active and Auto. With the help of Active mode, you can choose your mix of equity. But if you choose Auto, the PEMs will choose a scheme for you to reduce the risks.
- Partial withdrawal is applicable after 10 years of your NPS subscription. But the amount is not more than 25% of the contribution.
- Also, you can choose a premature exit whenever required. So, you should buy the annuity with 80% of the corpus. But, if you want to withdraw 100% of the corpus, then the amount of corpus should be a minimum of ₹ 1 lakh or less.
- In case of the death of the NPS subscriber, the entire corpus will be transferred to the legal heir or the nominee.
What are the alternatives to NPS investments?
Here are some alternative investment options to NPS:
PPF
PPF or Public Provident Fund offers government-guaranteed returns, and your amount will be matured after 15 years of investment. But unlike NPS here, you can’t decide how to invest your money.
EPS
Though EPS provides almost the same benefits as NPS, it has a lower scope than NPS. To open an EPS account, you must be a member of EPF (Employees Provident Fund). That means there must be an EPF in your company. Otherwise, you can’t be eligible for EPS. But NPS is applicable for any type of employment – government, public, private or unorganised.
ELSS
ELSS is an open-ended mutual fund for investing in equity. It provides higher returns than NPS. However, ELSS has higher risk and fewer tax benefits than NPS.
Conclusion
So, hopefully, you have learned the basics of the NPS account opening process. You can open an NPS account either online or offline. Also, before investing, consider the pros and cons of the same and check whether they align with your financial plans and then go for it.
FAQ’s:-
You have to pay ₹ 400 as an account opening charge and ₹ 50 as a PRA opening charge. Additionally, you have to pay other charges like contribution processing, annual PRA maintenance cost, charges per registration, asset servicing charges, investment management charges, etc.
To know about the NPS account opening HDFC Bank, you should visit the official website of HDFC Bank.
You can learn about the SBI NPS account opening online process by visiting SBI’s official site for NPS.
You have to download the NPS mobile app to your mobile device. Then open it and enter PRAN and password to check the status.