Salary is the only source of income for most individuals working in the private sector. But after retirement, managing finance is a big task for most of you. So, to help you out with the finances after retirement to fulfill your basic needs, the Government has announced a scheme known as National Pension Schema. Let’s have a look at this scheme in detail.
Table of Contents
What is National Pension Scheme?
National Pension Scheme is the financial security initiative started by the Central Government of India. Initially, this scheme was applicable to only the Central Government employees, but now PFRDA has made it available to all the employees of the private sectors and unorganized sectors voluntarily. It does not apply to armed forces.
In this scheme, you need to invest monthly a certain amount from your salary into your pension account to save during your employment period. After retirement, you can withdraw a certain percentage of the amount as a corpus, and later you will receive the remaining money as a pension each month.
NPS Scheme is a beneficial and much-needed scheme if you work in the private sector and need financial support after retirement. It is a portable scheme that means you can invest the money even if you change jobs or location and it won’t affect your account in any way. Your previous savings are secured in the account.
Types of NPS Accounts
There are 2 types of NPS accounts available, known as Tier 1 and Tier 2.
NPS Tier I Account
It is a mandatory account for all those who have opened NPS Scheme. The amount invested in it cannot be withdrawn before the maturity period. Also, you get a tax exemption of up to 2 Lakhs per annum for all the employees. You can contribute a minimum of Rs 500 to open the account, and yearly you need to contribute at least a minimum of Rs 1000, and the maximum can be whatever amount you want.
NPS Tier II Account
It is a voluntary account with no limitation on withdrawals, but you need an active Tier-I account to open this account. You can withdraw the amount you need anytime you want and don’t have to wait for the maturity period. If you are a central government employee, you get the benefit of tax exemption up to Rs 1.5 Lakhs, but if you are an employee in the private sector, you won’t have tax benefits. To open this Tier-II account, you need to contribute a minimum of Rs 1000. For yearly contributions, the minimum amount can be Rs 250, and the maximum can be any amount you want to save.
Features of NPS Account
As NPS is a Government-sponsored scheme, it has various unique features which make it a better investment option.
High Returns
A small portion of the money that you invest in the NPS goes to the equities, which means the returns you will receive after the maturity period will be well balanced. Also, the returns you get from this scheme are much higher than the other traditional schemes like PPF. Through this scheme, you get 8-10% annual returns on your savings.
Tax Benefits
This is another great feature of this account, as you can get various tax benefits on your investments. You can claim a tax deduction of Rs 1.5 Lakhs under section 80C of the Income Tax Act. This scheme is beneficial for those looking for maximum savings on their investments.
Ease of Access
You can easily manage your NPS account online with a unique PRAN number that is assigned to you to manage your finances. You can also manage your NPS account with the help of an app that is available on the Play Store and AppStore for free.
Good Liquidity
Opening an NPS account makes various liquidity options available to you. Once your account is 3 years old, you can withdraw 25% of the savings from the account to fulfill financial needs like buying a house, marriage, medical treatment, education, etc.
Fund Managers
NPS fund managers are the experts who are appointed and approved by PFRDA. They take all the important decisions related to your NPS account so that you can get maximum returns when your maturity period ends.
Benefits of NPS Account
NPS accounts provide various benefits to their subscribers, as mentioned below.
- Affordable – It is the low-cost pension scheme in India.
- Pension for everyone – Any working citizen can avail pension in India.
- Portable – NPS account is portable and can be transferred even after changing the employment, location, etc.
- Tax Exemption – Tax Tax benefits are available to the people who have invested in the scheme.
- Returns- Higher returns after the maturity period, depending on the investment option selected by the user.
- Accessible – Account can be accessed online 24 *7 with the help of PRAN.
Eligibility criteria of NPS Account
To open the NPS account, you must meet the criteria mentioned below:
- You must be a citizen of India (Resident or Non-Resident) or an Overseas Citizen of India (OCI).
- You should be between 18-70 years of age.
- You should comply with the Know Your Customer (KYC) norms as mentioned in the application form. Also, all the documents needed for performing KYC must be compulsorily submitted.
Who should invest in the NPS scheme?
If you are planning for early retirement or have a low-risk appetite, then the NPS scheme is the perfect option. After you retire from your private job, a regular income each month will be a boon for you, as you can easily manage your basic needs. You won’t have to depend on your children to manage your expenses at old age.
Also, if you are looking for a scheme that can help you with a tax deduction, then this scheme can help you out with it. Hence having a good investment scheme can make a massive difference in your life.
How to open NPS account?
NPS account can be opened online as well as offline, as the PFRDA operates it, and they offer to open the NPS account in both ways.
Online Process
- Go to https://enps.nsdl.com/
- Register and open your NPS account.
- Link your PAN card, Aadhar ID, and mobile number to the account.
- Validate the registration by entering the OTP sent on your registered mobile number.
- PRAN (Permanent Retirement Account Number) is generated, which you can use for logging into the NPS account.
Offline Process
To open the NPS account offline, you will need to take some effort.
- Contact the Point of Presence Service Provider (PoP-SP) first, which can be a bank too. Visit the link https://www.npscra.nsdl.co.in/pop-sp.php where you can select your state and location to view the list of POP-SP available in your area or nearby location.
- Collect the subscriber form and submit it along with all the KYC documents. If you are already a KYC compliant with that bank, then you don’t need to verify the documents again.
- Make an initial investment of not less the Rs 500.
- The Pop will now send you the PRAN number through a sealed welcome kit.
- Log in with the number and password mentioned in the kit to access the NPS account.
Note: There is a one-time process fee of Rs 125 for the registration of the account.
How to fill the NPS Registration Form?
You need to take the printout of the NPS registration form after downloading it from the website. The form must be filled in BLOCK LETTERS and with Black ink. Avoid making corrections on the form by overwriting. You can cancel and rewrite the details, but you need to countersign the corrections made in the form.
Here are the details that need to be filled in the registration form.
- Category: These are the different types of NPS models. Government employees must select Central Government or State Government, and corporate employees must select the Corporate sector. All the other citizens and the private company employees not covered under the corporate plan have to select the All Citizen Model.
- Personal Details: Fill in all your personal details like your name, your father’s and mother’s name, Date & place of birth, country of birth, gender, nationality, marital status, spouse name (if applicable) and the residential address.
- Identity Proof: You need to provide any one document along with the identification number. You can submit a Passport, Voter ID, Driving License, NREGA Job card, Aadhar Card (UID). If you submit any other document apart from this, you need to specify it in the form.
- Address Details: You need to mention your correspondence and permanent address on the form. Also, you need to submit any one document as an address proof like Passport, Voter ID, Driving License, NREGA Job card, Aadhar Card (UID), Ration card, Registered Lease/Sales Agreement of residence, Municipal Tax receipt or latest bill (Gas, Water, Electricity, Telephone or Mobile).
- Contact Details: Fill in contact details like the telephone number, mobile number and email id.
- Other details: In this section, mention your occupation details like sector, profession, income range, educational qualifications and of you are politically exposed or not.
- Bank Details: You need to enter the bank details like type of account, bank name, branch name, account number, IFSC code, branch address, Pincode and MICR code.
- Nominee Details: You need to mention the nominee for the NPS account. Add details like the nominee’s full name, Date of birth and your relationship with the nominee. In case if the nominee is a minor, then you need to mention his/her guardian’s detail.
- NPS options details: Here, you need to tick whether you need the Tier II account or not. Also, you need to select whether you want the PRAN number to be printed in Hindi or not.
- Pension Funds & Investment: Here, you need to select the pension funds you are interested in and want to apply for. Also, you need to select the investment option such as Active Choice or Auto Choice.
- FATCA Declaration: You need to specify whether you are a US resident or not. If not, then you need to specify the country name. This is solely for the tax purpose and therefore need to specify the tax details.
- Declaration: In the declaration section, you need to add the Date of application, place and signature in black ink. Also, in the Employers declaration section, your employer will have to mention your details like your Date of joining and retirement, your employee ID, etc.
How to log in to the NPS account?
If you are logging in to the NPS account for the first time then, below are the steps that can help you out.
To log in to the account, you will need the 12 digit PRAN number. You can avail this number by submitting all the required documents on the NSDL website or to the Point of Presence service.
NSDL NPS Portal
- Visit the official website of the NSDL NPS portal at https://www.npscra.nsdl.co.in/.
- On the top of the right-hand side, click on the button labelled, ‘Open your NPS Account/Contribute Online’.
- Click on the button labelled as ‘Login with PRAN/IPin’.
- A login screen will appear, in which you have to enter the PRAN and password and then click on the ‘Submit button. Now, you will have access to your E-NPS account.
- If you don’t have the password, then you can generate it manually by clicking on the link “Password for e NPS“, which appears on the login screen. Here you will have to provide the PRAN, Date of Birth, New Password and Confirmed Password and then click on submit button. Now, you will receive an OTP on the registered mobile number, which you need to enter on the screen to confirm your password. Again, you will have to log in to your E-NPS account with PRAN and a new set password.
How can I change the NPS account details?
You can make changes or corrections in your account details like the personal details, bank details, nomination details, or reissuing of the PRAN. You can change your photograph and signature by sending the written requests to the POP.
Here are the forms which need to be submitted if you want to make any changes to your NPS account. Each form is different and used for specific change details.
- Form UOS S2– This form needs to be submitted if you want to change the personal or nominee details or if you want to reprint the PRAN card.
- Form S3 – This form needs to be submitted if you want to change your current scheme or if you want to change your employment details.
- Form S7 – This form needs to be submitted if you want to change the photograph or signature.
Some of these details can be changed via the NPS mobile app available for both Android and iOS devices.
When can you withdraw money from the NPS account?
You can withdraw the money from the NPS account as mentioned below.
Withdrawl at the age of 60 or on retirement
At this time, you can withdraw 60% of the accumulated corpus, and the remaining 40% of the corpus amount can be used for purchasing the annuity for the monthly pension. You can withdraw 100% corpus in the NPS account if the amount is less than 2 Lakhs.
Withdrawl before retirement
If you want to withdraw the amount before your retirement period, then only 20% of the corpus can be withdrawn. The remaining 80% of the corpus must be compulsorily used to purchase the annuity for monthly pension.
Withdrawl upon death
The government employees should purchase the annuity plan and then withdrawn a certain amount. Employees from the other sectors can withdraw 100% of the corpus in the NPS account.
What services are available on the NPS Mobile app?
The NPS app is available for Android and iOS device users. On this app, you can perform functions like:
- Review and request the transaction statements on your email id.
- Change your residential address using an aadhar card.
- Change the scheme preferences.
- View the current account details and current holdings.
- Change the password or secret question.
- View last 5 contributions.
- Initiate the withdrawal from the Tier II account.
- Change the contact details.
- Get the notification related to the NPS scheme.
What are the different types of forms available related to the NPS account?
There are multiple forms available, and each serves a different purpose. Let us have a look at these forms.
User Registration
- Form CSRF: User Registration Form
- Annexure I: Tier II Details
- Annexure-II: Additional Details Request
- Annexure III: Additional Nomination Details
- Form NSRF: User Registration Form for NRI
- Subscriber Registration Form NSRF Annexure I
- Subscriber Registration Form NSRF Annexure-II
- S10: User Registration Form Tier-II
POP / POP-SP Registration
- Form UOS-N1: Pop-Registration Form
- Form UOS N1-A: POP’s DSC Details Submission
- Form UOS N2: POP-SP Registration
- Form UOS N2-A: POP-SP’s DSC Details Submission
- Annexure NE-5: Bank Details Update Form
NPS Account Maintenance
- Form UOS S2: Change User Detail
- Form UOS S7: Change User’s Photo and signature
- Form S3: Scheme Preference change
- GoS-S3: Scheme Preference Change
- S12: Withdrawal Form Tier II
- UOS S13: Form for One Way Switch
- Form UOS S5: Change User’s POP-SP
- Form UOS-S06: Change User’s POP
- UOS-S10A: Application for unfreezing PRAN
- Form ISS: Inter Sector Shifting
- PAN & Aadhaar Updation Form
- Form ICSS – Inter CRA user shifting form
Subscriber Grievances
- Form G1: Subscriber Grievance Registration
Withdrawal Forms
- Form for exit due to Incapacitation & Superannuation
- Form for Premature Exit
- Form for Withdrawal by Claimant due to Death of Account user
- Complete Withdrawal Request Form AP
- Complete Withdrawal Request Form AS
- Form 601-Partial Withdrawal under NPS
- Affidavit for non submission of PRAN Card_subscriber
- Affidavit_For non Submission of PRAN Card_claimant
- Death certificate certification if received in Vernacular Language
- Indemnity Bond
- Relinquishment Deed
- Request for Continuation or Deferment
Frequently Asked Questions on NPS Account
What is PRAN & PRAN kit?
Once you have registered for the NPS account, you will receive a PRAN card with your photograph, signature, Date of birth, and your father’s name. This card is proof that all the information on the CRA system is completed. The PRAN kit consists of a PRAN card, your complete details, and an information booklet.
How to check the NPS account balance online?
You can check your account balance online on the NPS portal by logging in with your PRAN and password.
Can you avail NPS services online?
You can avail of some of the NPS-related services like changing personal details, generating or resetting pin, changing schemes, viewing account statements, viewing or printing ePRAN card, and changing account details.
What is IPin?
IPin is a password that is used for accessing the NPS account.
How can I reset my IPin?
To reset your IPin password, you need to visit the login page and click on the ‘Forgot Password’ option. Now you need to select the ‘Instant reset IPIN’ option and enter all the required details. You can now set a new password. After you set the password, you will receive an OTP on your registered number to confirm your password. Once you enter the OTP on the screen, your password will be reset.
How to avail the duplicate PRAN card?
You can request a duplicate PRAN card by filling the Form UOSS2 and submitting it to the nearby POP. After the form is verified, the POP will address your concern and add the request to the CRA system. After this procedure, a duplicate PRAN will be issued to you.
Conclusion
National Pension Scheme (NPS) is one of the best investment options that one can opt for to save their finances for the future. Investing for a long time can help you gain high returns at the time of your retirement. Therefore, it is considered a lifesaver by the employees as it helps manage the expenses of their basic needs after retirement.
I hope this article has given you a brief about NPS and made it easy for you to take the decision of investment.
If you know any other NPS information, then share it with the readers in the comment section below.
Acronyms used in the article
- NPS: National Pension System
- PFRDA: Pension Fund Regulatory and Development Authority
- PPF: Public Provident Fund
- PRAN: Permanent Retirement Account Number
- OCI: Overseas Citizenship of India
- NRI: Non-Resident Indian
- KYC: Know Your Customer
- PoP: Point of Presence
- PoP-SP: Point of Presence-Service Provider
- NREGA: National Rural Employment. Guarantee Act
- IFSC: Indian Financial System Code
- MICR: Magnetic Ink Character Recognition
- NSDL: National Securities Depository Limited
- OTP: One Time Password
- CSRF: Common Subscriber Registration Form
- UOS: Unorganised Sector
- DSC: Digital Signature Certificate
- CRA: Central Recordkeeping Agency