Due Diligence. eNPS for eleventh hour tax-savers

Racing to meet the March 31 deadline to make tax-saving investments? You can consider the National Pension System (NPS). For an investment of ₹50,000 over and above the ₹1.5 lakh limit under Section 80C, the NPS will help you save up to ₹15,450 (₹50,000*30.9 per cent) additionally in taxes.

The Budget has only made it more attractive by making part of the corpus tax-free on maturity. Besides, online investments have now been enabled to help you invest in a jiffy, vital for eleventh hour tax-savers!

Offline mode Until a few months ago, you did not have much of a choice but to invest in the traditional manner. This would mean approaching specified branches of the banks authorised to sell NPS or going to brokerages, such as ICICI Securities, HDFC Securities or other intermediaries such as CAMS and Karvy. The process involved filling up a detailed registration form manually, providing a photograph, submitting KYC documents, such as proof of identity, age, address and a cheque towards the first contribution. These would then be processed and forwarded to the corresponding authorities under the NPS, which would allot a Permanent Retirement Account Number (PRAN) to you and open an NPS account in your name.

Although some of the banks/ brokerages/ intermediaries allowed download of the forms from their websites, some of them helped use internet banking or set up standing instructions for contributions; however, procedures varied from bank to bank or intermediary to intermediary.

Investment made easy now Now, things have become easier with the introduction of eNPS ( https://enps.nsdl.com ). Without going to any bank or intermediary, one can now register under the NPS, generate a PRAN and make contributions at the click of a mouse.

If you have an Aadhaar number, the KYC process will be done using Aadhaar, through a one-time password sent to your mobile phone for authentication. Your personal details, photo, etc. will be picked up from the Aadhaar database. You can fill up the rest of the form online and upload your signature as well. Similarly, you can also go through the entire process online if you have an account with any of the empanelled banks for KYC verification and a PAN number. About 20 banks, mostly from the public sector, have been empanelled. The list of banks is available in the eNPS website.

In both cases, after filling up the form and verification, you need to make your initial contribution online. It will help if your Aadhaar or PAN is linked to your bank account. Upon payment of the initial contribution, you will be allotted a PRAN immediately.

Using the PRAN, you can make subsequent contributions online. The only point to note is that you need to take a print-out of the application form, sign your name, paste your photo and post it to the Central Recordkeeping Agency within 90 days of allotment of PRAN.

With the entire process being made online, you don’t have to worry about which bank or branch offers NPS investments or which intermediary to go to and what procedures to follow; this has been made uniform.

Secondly, payment through credit cards is also allowed for the eNPS, which means that you can now invest and get the deduction even if you have a temporary cash flow issue.

Thirdly, under the offline mode, you could not really postpone investment too much towards the end of March because of the time taken for the dispatch of your forms, processing and allotment of PRAN.

But with the process now being made end-to-end online, NPS accounts can literally be opened till the midnight of March 31, much like how you can upload your income tax return until the midnight of July 31 each year.

Four, even those who have earlier opened NPS accounts offline can switch to the online mode now. Existing subscribers can log on to the eNPS website and click on the contribution tab, authenticate their PRAN using a one-time password sent to their mobile numbers and then pay through credit/debit card or internet banking.

Finally, with this process effectively doing away with the need for banks and other intermediaries, you can also save on the charges that were otherwise payable to them — for subscriber registration, contribution processing, and for non-financial transactions (request for change of investment scheme or fund manager, change in personal details, etc)