NPS or the National Pension Scheme is a Govt. social security scheme which is designed to provide a steady income stream to the employees after retirement. To make the things digital, Government of India has initiated the new eNPS system which helps you to open the NPS account online. Any individual employed with private sector, professional or self employed can avail this facility. In this article, let us explore the steps to open National pension scheme (NPS) online in detail.
What is NPS (National Pension Scheme)?
The NPS Trust was established by PFRDA on 27th February, 2008, which was aimed at taking care of the assets and funds under the National Pension System (NPS). Individual NPS subscribers are considered as the beneficiaries of the NPS Trust.
Later on in it was made available for all citizens of India (from 2009) and for the corporate sector (from 2011). So now any individual can now avail of pension benefits by enrolling to this scheme. To avail the advantages, you must have the Permanent Account Number (PAN) and a Bank account with any of the registered Point of Presence empanelled for KYC verification.
The employee/citizen who joins the NPS will be known as Subscribers under the National Pension Scheme. The subscribers will have to open an account with the Central Record keeping Agency (CRA) where they will contribute a monthly amount towards their National Pension Scheme. The NPS account will be identified through their unique Permanent Retirement Account Number (PRAN).
As per investor choice and risk profile, the monthly contribution will then be invested in different investment opportunities. On retirement, the person will be able to withdraw a part of the corpus as lump sum. The balance amount will be paid out as pension annuity.
Types of NPS Account
Under NPS, two types of Tiers are available to the subscribers – Tier I and Tier II.
- Tier I Account: The subscribers in Tier I account contribute his / her savings for retirement into an account which is non-withdrawal. Employers’ contribution may be included in case of corporate sector. Pre-mature withdrawal is allowed only if the subscriber completes 15 years of service. 50% of the contributed amount can be withdrawn if the person has minimum 25 years of service.
- Tier II account: This is a voluntary saving account and the subscribers in Tier I account can freely withdraw an amount whenever they need it. Every citizen of India including Govt. employees and corporate sector should have an active Tier I account for opening of a Tier II account.
Recently PFRDA (Pension Fund Regulatory Development Authority) has introduced 2 models under the NPS scheme.
- All Citizen Model: This scheme is open for every Indian citizen and NRI’s between the age group of 18 to 60.
- NPS for Corporate: This scheme is open for corporate employees.
NPS account is similar to a unit linked investment plan (ULIP) or unit-linked pension plan (ULPP).
How to open NPS account online: e-NPS Online Registration
Step 1: To open an NPS account using the new e-NPS system first of all, visit the eNPS portal.
Step 2: Click on ‘Registration’ to become an NPS investor. If you are an existing NPS subscriber, click on ‘Contribution’ option. Or else complete your KYC using your Aadhaar. OTP (one time password) authentication will be done through the registered mobile number with the Aadhaar.
Step 3: Subscriber’s details will be fetched from Aadhaar database including photograph. You need to upload the scan copy of your signature and enter payment details. You may also replace your photo obtained from the Aadhaar system.
Step 4: Your PAN number will then be validated online with the Income Tax dept and you will get the PAN Details confirmation message after successful verification.
Step 5: Choose the ‘Pension Fund Manager’ & ‘investment option’ (auto / active) under ‘scheme & nomination’ menu.
Step 6: You need to make an initial payment of Rs. 500 to open the account. You may pay through debit/credit card or internet banking. A PRAN (Permanent Retirement Account Number) will be allotted to you after successful initial payment.
Step 7: The PRAN kit containing a PRAN Card, IPIN/TPIN, Subscriber Master Report, Scheme Information Booklet, will be sent to your registered address along with a welcome letter.
Step 8: The selected Bank will then receive the details of the subscriber through CRA system. After KYC verification, the PRAN will become active and operational.
Step 9: After completing the online registration, you need to take a printout of the pre-filled NPS online application form, sign the form and paste your photograph. Then send it to the CRA address within 90 days from the date of allotment of PRAN or else your PRAN will be temporarily frozen.
Step 10: If you are an existing NPS subscriber, you can click on the Contribution option on eNPS home page. There just provide your PRAN number & Date of birth details to get an OTP for authentication. After that, simply contribute to your NPS account through internet banking or your debit/ credit card.
Tax benefits of NPS Scheme: Employee Tax benefit
Employed Individuals who are contributing towards NPS can avail tax benefits on the investments as well as the employer’s contribution.
Employee’s Contribution: Under Section 80 CCD, the employees are eligible for tax deduction up to 10% of Salary (Basic + DA) within the overall ceiling of Rs. 1.5 lakh (provided under Sec 80 CCE).
Employer’s Contribution: Under Sec 80 CCC, the employees are eligible for tax deduction up to 10% of Salary (Basic + DA) contributed by employer over and above the limit of Rs. 1.5 lakh (provided under Sec 80 CCE).
For investments in the National Pension Scheme, there is an additional tax exemption of Rs 50,000 from the financial year 15-16.
How to invest in NPS scheme online: eNPS Contribution
Earlier you could contribute to NPS scheme online through CAMS or ICICIdirect only. Now, with the new eNPS system, the subscribers can directly invest online in the NPS scheme.
Have you invested through the new eNPS system? Feel free to share your experience of opening NPS account online.