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NPS - National Pension System

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NPS ACCOUNT OPENING ONLINE - NATIONAL PENSION SYSTEM

The Government of India has initiated and incorporated several schemes and policies for the betterment of the future and safeguarding the interests of the citizens of India. One such scheme issued by them is NPS. It is a farsighted government-sponsored pension scheme launched in 2004 for people aged between the age of 18 to 60 years. It is an intelligent financial security instrument that encourages the subscribers to invest towards their retirement fund through systematic savings during their term of employment. The NPS is regulated by the PFRDA and follows transparent investment norms. This scheme offers the subscribers stable and reasonable returns on their long-term investments.

Alankit is the best POP SP, Point of Presence Service Provider, and the principal distributive point for NPS. We are responsible for handling and managing the subscriber requests, queries, complaints and providing guidance, support and all other services related to the NPS as a whole. Our team of professionals and experts undertake the responsibilities of initial subscriber registration, KYC verification, transmitting the information systematically to the designated intermediaries in an uncomplicated manner, etc.

Types of NPS Account

NPS comes with two types of pension accounts.

The Tier-I account, a regular retirement account of an individual. It is a default account with restrictions on withdrawal. It can be opened under the NPS(Central Govt), NPS (State Govt), NPS (Corporate) and NPS (All Citizens Models). This account matures at the age of 60 but can be extended till the age of 70, and individuals are required to deposit a minimum of Rs1,000 per annum to keep the account active. However, there is no upper limit on the contribution amount.

The Tier-II account is a voluntary retirement-cum-savings account without any withdrawal restriction for the individual. The Tier-II account is an investment account without any locking period, and it can be opened only if an individual has a Tier 1 account. Individual subscribers are free to invest or withdraw their money at any point in time. The subscriber has to make an initial contribution of Rs 1,000 while opening the Tier-II account, or a minimum contribution of Rs 250 per month could be chosen. It is important to maintain a minimum balance of Rs 2,000 at the end of a financial year.

Documents required for NPS

For opening an NPS account, you need to submit the registration form with various documents for KYC compliance. The documents that are required are:

  • Documents for your identity proof and date of birth
    • Water bill
    • Electricity bill
    • Driving license
    • School leaving certificate
    • Rent receipt
  • Address proof
  • Photograph
  • Bank account details
  • AADHAR card number or PAN card

NPS Account Opening Procedure

There are two ways for opening an NPS account.

• Offline: For opening the account offline, you need to fill and submit the CSRF forms with required KYC documents to the corporate employers. After verifying the details, they will send these forms to any of the Point of Presence Service Provider along with the documents stated above. POP does KYC verification and sends these forms to Central Recordkeeping Agencies. CRA keep the records of your NPS account and functions like registrar and transfer agent. After the account is opened, the CRA will send the subscriber’s PRAN and the details as provided in the Subscriber Registration Form. You will also receive a Telephone Password (TPIN) for accessing your account on the call centre number and an Internet Password for accessing your account through the website.

• Online: This can be done by visiting the website of either NSDL or Karvy. There are two routes through which you can register yourself for an NPS account. One is Aadhaar-based verification, and the other is PAN-based verification. Under this process, you need to upload the scanned copies of your documents, the scanned copy of cancelled cheques, your signature in specified formats, and your photograph online.

Features & Benefits of National Pension Scheme (NPS)

  • Returns/ Interest - A specific part of the amount invested in one’s NPS is duly invested in the market in different equities, which does not offer any guaranteed returns. However, in all probability the returns are usually higher as compared to the conventional tax-saving investments such as the PPF. NPS has been going strong since over a decade now, and till now, it has delivered annual returns of about 8% to 10%. The scheme also offers one the freedom to change their fund manager if required in case the performance of the fund is not coming as per expectations.
  • Contribution of Investor - Despite there being no particular upper limit as such, there is still a fixed requirement of the minimum investment amount. One is required to invest either a minimum monthly amount of Rs. 500 (Tier I account) or Rs. 250 (Tier II account) at least, or an annual amount of Rs. 1,000 (Tier I account). In case one is unable to sustain the minimum specified amount, the account will automatically get will freezed. It can then be unfreezed by giving a penalty at any of the nearest Point of Presence (PoP).
  • Assessment of Risk - As of now, there is a fixed cap of 50% on equity exposure for the national pension scheme. Owing to this, the ratio of risk and return is stabilized in the investor’s interest. Thereafter, the corpus is somehow protected against the instability of the equity market. However, the potential of earning is higher as compared to any other fixed income schemes. The PFRDA has plans to increase this cap on equity exposure to 75% in the coming times.

Interest Rate on the Returns Earned Under NPS

A specific part of the amount invested in one’s NPS is duly invested in the market in different equities, which does not offer any guaranteed returns. However, in all probability, the returns are usually higher as compared to conventional tax-saving investments such as the PPF. NPS has been going strong for over a decade now, and till now, it has delivered annual returns of about 8% to 10%. The scheme also offers one the freedom to change their fund manager if required in case the performance of the fund is not coming as per expectations.

Tax Benefits Under National Pension Scheme

Every salaried person or a businessman looks forward to various schemes and policies to avail tax benefits. Investments in NPS is a topic of discussions amongst individuals, whether they are liable to tax benefits in respect to the contributions made by the employer as well as employee/self-employed person. Let’s see this in details:

• Tier 1 account: The Tier-I account carries a tax deduction under Section 80C up to Rs 1.5 lakh per annum and up to Rs 50,000 per annum under Section 80CCD (1B). Upon maturity, it is mandatory to use 40 percent to buy an annuity. The rest, 20 percent, could be used to purchase an annuity from approved life insurers or could be withdrawn after paying tax.

• Tier 2 account: There are no deductions under this account for private-sector employees or self-employed individuals. The returns on NPS Tier 2 are also taxable. However, there will be a tax deduction for the government employees under section 80C for investment.

What is National Pension System (NPS)

Every salaried and non-salaried person feels the pressing needs to save a substantial amount of money for their retirement funds and medical expenses. They wish to develop a significant fund for the second innings of their life, and NPS provides them with the freedom of attaining just that. That ensures people making a regular investment in an account during one’s period of employment. A regular income invested in the account in one’s active years can be a great way to secure one’s future, particularly for those getting retired from private-sector jobs.

Our government is already providing a pension facility for the employees working in the public sector, but those working in the private corporate sector or any unorganized segment also do not have access to this facility. That’s exactly why a systematic plan of investment such as NPS can be a good choice. It is also very beneficial for all the salaried class people on the lookout for taking the maximum advantage of 80C deductions under this scheme.

How to open NPS account online

An NPS account can easily be opened online with the help of logging in to the website of NSDL.

  • Click on the “registration” tab and choose “individual”.
  • Enter your AADHAR number or PAN card number
  • An OTP will be sent to your registered mobile number for verification.
  • Choose Tier 1 account. If wanting to invest for other goals, you can also choose Tier 2.
  • If you chose Aadhaar, simple OTP authentication is required. If using PAN, your bank will verify your details and charge Rs 125.
  • Fill in the asked personal details in the form. Submit to generate acknowledge number.
  • Choose any of eight pension funds. If you are opting for active management, you need to specify how to spread corpus across fund classes.
  • Give details of the nominee
  • Upload your picture and signature.
  • Make the contribution and get PRAN
  • Download the complete form.

Who should invest in National Pension Scheme (NPS)

NPS is a highly beneficial scheme that allows one to develop a significant fund for the second innings of life by regularly making an investment in this account during one’s period of employment. A regular income invested in the account in one’s active years can be a great way to secure one’s future, particularly for those getting retired from the private sector jobs. Our Government already provides this type of pension facility for the employees working in the public sector but those working in the private corporate sector or any unorganized segment also do not have access to this facility. That’s exactly why a systematic plan of investment such as NPS can be a good choice. Thus, all the salaried class people on the lookout for taking the maximum advantage of 80C deductions may also consider this scheme.

How much I can Invest in National Pension Scheme

Tier I subscribers are required to make contributions subject to the following conditions:

  • Minimum amount at the time of account opening: Rs.500/-
  • Minimum amount per contribution: Rs.500/-
  • Minimum contribution per year: Rs. 6000/-

Over and above the mandated limit of a minimum of one contribution, a subscriber may decide on the frequency of the contributions through the year as per his/her convenience.

Minimum contribution requirements for Tier II are:

  • • Minimum amount at the time of account opening: Rs.1000/-
  • • Minimum amount per contribution: Rs.250/-
  • • Maintenance of minimum balance at the end of each financial year: Rs.2000/-

Both Tier I and Tier II accountholders have to make at least one contribution in a financial year.

Withdrawal Process in National Pension Scheme

Subscriber can initiate withdrawal request online through their NPS account log-in. These requests need to be verified and authorized by the associated POP. The subscriber needs to submit the physical withdrawal form in case the subscriber is not able to initiate an online withdrawal request, along with the required documents to the POP. Based on the subscribers request, POP will initiate the online withdrawal request on behalf of the subscriber.

• NPS Partial Withdrawal Rules

  • The subscriber should have invested in NPS for at least 3 years.
  • Withdrawal amount should not be exceeding 25% of the contributors made by the subscriber.
  • Withdrawal can only happen for a maximum of three times during the entire tenure of subscription.
  • Withdrawal can be made under the following circumstances.
    • Higher education of children
    • Marriage of children
    • For the purchase/construction of the residential house (in specified conditions)
    • For treatment of Critical illnesses

• NPS Premature Withdrawal Rules – Tier I &Tier II

  • Premature withdrawal before maturity for NPS Tier 1 can only be made after the completion of 3 years from the date of opening of the NPS account.
  • You can only withdraw 20% of your corpus at the time of premature exist. The remaining 80% must be used to buy an annuity. Both the 20% withdrawal and the annuity are taxable.

Frequently Asked Questions About NPS-NATIONAL-PENSION-SYSTEM

To contribute in Tier I and Tier II accounts, the subscriber needs to deposit the contribution amount along with the duly completed NCIS (NPS Contribution Instruction Slip) to any POP-SP.

Tier I subscribers are required to make contributions subject to the following conditions:

  • -Minimum amount at the time of account opening: Rs.500/-
  • -Minimum amount per contribution: Rs.500/-
  • -Minimum contribution per year: Rs. 6000/-

Over and above the mandated limit of a minimum of one contribution, a subscriber may decide on the frequency of the contributions through the year as per his/her convenience.

Minimum contribution requirements for Tier II are:

  • - Minimum amount at the time of account opening: Rs.1000/-
  • - Minimum amount per contribution: Rs.250/-
  • -Maintenance of minimum balance at the end of each financial year: Rs.2000/-

Both Tier I and Tier II accountholders have to make at least one contribution in a financial year.

Employers’ contributions to NPS on behalf of their employees will receive deductions from income (employer’s income), an amount equivalent to the amount contributed or 10% of the Basic Salary + DA of the employee, whichever is less. (Section 36(1) (iv a) of the Income Tax Act 1961). Individual employees contributing additionally to the NPS, the investment is eligible for deduction from income under Section 80CCD of the Income Tax Act 1961.

The following applicants cannot join:

Undischarged insolvent: Individuals who are not granted an ‘order of discharge’ by court.

Individuals of unsound mind: An individual is said to be of unsound mind for the purposes of making a contract if, at the time of making it, he is incapable of understanding it and of forming a rational judgement regarding its effect upon his self-interest.

Pre-existing account holders under NPS.

In the event of a subscriber’s death, the beneficiary submits a withdrawal request to the associated POPSP who will enter the request in the CRA system. After the request is processed, a cheque is issued favoring the beneficiary and forwarded to the associated POP.
CRA – Central Record Keeping Agency – is the core infrastructure for the NPS. It is managed by NSDL and its main function is recordkeeping, administration and customer service functions for all NPS subscribers such as, issuing unique PRAN (Permanent Retirement Account Number) to each subscriber, maintaining a database of all PRANs issued and recording transactions related to each subscriber’s PRAN.
On successful registration, PRAN (Permanent Retirement Account Number) will be allotted to the subscriber. The PRAN Card is a document with the PRAN, subscriber name, subscriber’s father’s name, photograph and the subscriber’s signature or thumb impression.
An individual cannot transfer savings from one NPS account to another.
Annuity is the context of NPS refers to the monthly sum that is received by the subscriber from the Annuity Service Provider after he attains the age of 60.
If a subscriber wishes to exit from NPS before attaining the age of 60, he/she can withdraw up to 20% of the sum accumulated till that point of time. The subscriber has to buy annuity with the rest of the money. If a subscriber dies before attaining the age of 60, the entire sum goes to the nominee.
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