The National Pension Scheme NPS is a Central Government backed
social security scheme intended to benefit employees from the public, private,
and unorganized sector. Initially, the NPS scheme details to focus government
employees, but after 2009, the account was open to all sections of the society.
Under the NPS investment, the depositor is entitled to make a monthly
contribution until he reaches the age of 60 years. So that once he retires, he withdraws
a part of the contribution as a lump sum amount. And the other half of the
amount can be used to invest in securities that offer him a regular
income.
Types of NPS account
NPS
investment comes with two kinds – Tier-l
and Tier-ll accounts. Let's have a look in detail about Tier l and Tier-ll
accounts.
Tier-l account
- Tier l account is a mandatory account, which is meant for retirees.
- There are restrictions to withdraw from Tier-l account before and after retirement.
- Before attaining 60 years of age, you can only withdraw 20% of the contribution while the rest 80 per cent must be necessarily used for buying securities that generate regular income.
- After reaching 60 years, you can only withdraw close to 60 per cent, and the rest 40 per cent again has to be used for buying the annuity from approved life insurers.
- Tier 1 account is divided into three insurance plans like – SBI pension funds private ltd, UTI retirement solutions ltd, and LIC pension ltd.
- You get tax exemption up to INR 2 lakh under Section 80C and 80CCD of the Income Tax Act.
- The minimum contribution is INR 500 or 1000 per annum.
- There is no limit for maximum contribution.
Tier –ll Account
- Tier-ll is a voluntary NPS investment where the withdrawals are permitted.
- It is necessary to maintain a minimum balance of INR 2,000 at the end of a financial year.
- The investment of tier ll account is made on a mix of securities like equity, government funds, FDs, corporate bonds, and liquid funds like real estate, property, etc.
- The minimum contribution is INR 250 per annum
- The maximum contribution doesn’t have any limit.
The online process of opening an NPS account is simple and easy. Make
sure you have linked your mobile number and Aadhaar card with the bank and PAN
card. Following are the steps to follow:
- Go to the official website of NPS – enps.nsdl.com
- Click on the registration and choose the option –‘Register with Aadhaar’.
- Enter your Aadhaar number and click on ‘Generate OTP.’
- An OTP will now be sent to your registered mobile number.
- Enter the OTP, which will then redirect you to the page where you need to enter the details. This includes personal information, bank details, and nominee details.
- Once the individual submits the required data with proofs withstanding the documents, another OTP will be sent to the registered mobile number
- Enter the OTP and make payment.
How to open NPS account offline
To open an NPS account offline, the depositor has to go to the PoP
(Point of Presence). It could be a bank too.
- Collect a subscriber form from your nearest PoP
- Submit all the KYC documents.
- Once you make the initial payment, the PoP will send you a PRAN (Permanent Retirement Account Number).
- This number and password will help you operate your NPS account.
