The National Pension System (NPS) has been gaining interest among investors in recent years. Along with tax benefits, a better return profile and choice of funds have given NPS an edge over other tax saving instruments. An amount of Rs 2 lakh invested each year in this pension plan qualifies for tax exemption (eligible for Rs 1.5 lakh tax break under Section 80C and Rs 50,000 under Section 80 CCD (1B).
An Indian citizen or non-resident in the age group of 18-60 years can open an NPS account. Contributions made by NRIs are subject to regulatory requirements as prescribed by RBI and FEMA from time to time. If the subscriber's citizenship status changes, his/her NPS account would be closed.
On maturity at the age of 60 years, an investor can withdraw 60 per cent of the corpus. The remaining 40 per cent has to be compulsorily invested in the annuity option to get a monthly pension.
Selecting a pension fund manager
The Pension Fund Regulatory and Development Authority (PFRDA) currently allows SBI Pension Funds, HDFC Pension Management Company, ICICI Prudential Pension Funds, Kotak Mahindra Pension Fund, Reliance Capital Pension Fund, UTI Retirement Solutions, LIC Pension Fund and DSP Blackrock Pension Fund to operate as Pension Fund (PF) managers. In case you do not indicate a choice of PF, it is deemed that you have consented for the default PF manager, SBI Pension Funds.
Selection of investment option
Once a pension fund manager is chosen, you need to indicate your choice of investment, i.e. active choice or auto choice. Under the active choice, there are three categories of funds (E, C, G) based on the underlying assets - Fund E , Fund C and Fund G. Under the auto choice, which is a lifecycle fund, the PFRDA decides, based on your age, how much of your funds should be in each asset class. One may go through the website www.pfrda.org.in for details of the investment choices and fund management details.
Switching between pension fund managers
You can switch from one PF manager to another if you are not satisfied with the performance of the current one. One switch is allowed each year. However, you must buy all three funds from the same PF manager. You cannot buy equity funds from one, corporate bonds from another, and government securities from a third PF manager.
eNPS
A step-by-step guide for new applicants to open an NPS account online through enps.nsdl.com
The eNPS facility of the National Pension System Trust allows opening of individual pension accounts under NPS and making initial and subsequent contributions to Tier-I and Tier-II accounts.
Option 1 - Registration using Aadhaar
* You must have an 'Aadhaar number' (with a mobile number registered with Aadhaar)
* Your KYC in NPS will be done using Aadhaar through One Time Password (OTP) authentication
* OTP for the purpose of authentication will be sent to the mobile number registered with Aadhaar
* Your demographic details and photo will be fetched from the Aadhaar database and populated in the online form
* You need to fill up all the mandatory details online
* You would be required to upload your scanned signature (in *.jpeg/*.jpg format) as part of the registration process
* In case, you wish to replace the photo obtained from Aadhaar, you may upload a scanned photograph
* You will be routed to a payment gateway for making the payment towards your NPS account from debit/ credit card or Internet Banking
Option 2 - Registration using PAN (KYC verification by the bank)
* You must have a 'Permanent Account Number' (PAN)
* An account with the empanelled bank for KYC verification, for subscriber registration through eNPS
* Your KYC verification will be done by the bank selected by you during the registration process. The name and address provided during registration should match the bank records for KYC verification. If the details don't match , the request is liable for rejection. In case of rejection of KYC by the selected bank, the applicant is requested to contact the bank
* You need to fill up all the mandatory details online
* You need to upload your scanned photograph and signature in *.jpeg/*.jpg format, with a file size between 4kb - 12kb
* You will be routed to a payment gateway for making the payment towards your NPS account from Internet Banking
For NRI subscribers
* Select the Bank Account Status i.e., Non-Repatriable account or Repatriable account
* Provide the NRE/NRO bank account details and upload a scanned copy of your passport
* Select the preferred address for communication i.e. Overseas Address or Permanent Address (communication at overseas address would entail extra charges)
After a Permanent Retirement Account Number (PRAN) is allotted, the subscriber can use one of the following options:
Option 1 - eSign
For Tier I PRANs generated through Aadhaar, you have the option to eSign the document by following these steps:
* Select 'eSign' option in the eSign / print and courier page
* OTP for the purpose of authentication will be sent to your mobile number registered with Aadhaar
* After authentication of Aadhaar, the registration form will be successfully eSigned
* Once a document is eSigned, you need not send the physical copy of the form to CRA
* eSign charge ₹ 5 plus GST
Option 2 - Print and Courier
* Select 'Print & Courier' option in the eSign / Print & Courier page
* You need to take a printout of the form, paste your photograph (do not sign across the photograph) & affix signature
* You should sign on the block provided for signature
* The photograph should not be stapled or clipped to the form
* The form should be sent within 90 days from the date of allotment of PRAN to the central record keeping agency in Mumbai, else the PRAN will be 'frozen' temporarily
Processing subsequent contributions
All existing subscribers (registered through both online and offline mode) can contribute in Tier I & Tier II accounts using 'eNPS'. To contribute online, you need to
* Have an active Tier I / Tier II account
* Authenticate your PRAN using the OTP sent to your registered mobile number
* Pay through your debit / credit card or use the Internet Banking option.
* POP Service Charges will be applicable on the contribution amount @ 0.10% (subject to minimum of Rs 10 and maximum of Rs 10,000 per transaction). This service charge will not be applicable for subscribers registered in eNPS through Aadhaar.