How to open a new NPS account and start investing in 5 minutes?

NPS – National Pension System

NPS is a Government of India initiative regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It is aimed to offer retirement benefits to its subscribers through a transparent platform in a cost-effective way.

Benefits of NPS

NPS returns are market based, dependent on the asset allocation amongst Equity (E), Corporate Bonds (C), Government Securities (G) and Alternate Investment Funds (A) and are directly linked to the market as per the market returns

NPS provide additional tax savings as contributions made are eligible for additional tax deduction benefit on voluntary contribution of up to Rs. 50,000/-under section 80CCD (1B), over and above Rs.1,50,000/-u/s 80C. To avail tax benefit, one needs to subscribe for TIER- I account. Investments in TIER-II account is not eligible for any tax benefit. (You can choose an account type during the process of initial subscription to NPS)

Can start Investing with as small as Rs 500/-

It is an investment option that might be suitable for your retirement planning

Features of NPS

1. PRAN (Permanent Retirement Account) Number

On successful registration under NPS, a PRAN (Permanent Retirement Account)
Number is allotted to the subscriber that remains with the subscriber throughout.

2. Flexibility to choose service provider

The subscriber has the flexibility to choose an annuity service provider. Available National Pension Schemes:

• HDFC Pension Management Company Limited Scheme 
• ICICI Prudential Pension Fund Scheme 
• KOTAK Pension Fund Scheme
• LIC Pension Fund Scheme
• SBI Pension Fund Scheme 
• UTI Retirement Solutions Pension Fund Scheme 
• Aditya Birla Sun life Pension Fund Scheme 

3. Flexibility of choose investment distribution

The subscriber also has the flexibility to choose the amount of investment done in a scheme to be distributed among Equity (E), Corporate Bonds (C), Government Securities (G) and Alternate Investment Funds (A), within some pre-described maximum percentage limitations for each category of asset. 

To select your allocation, NPS offers you two approaches to invest in your account: 

1. Active choice

In Active choice, Subscriber selects the allocation percentage in assets classes.

2. Auto choice

In Auto choice, funds are automatically allocated amongst asset classes in a pre-defined matrix, based on the age of the subscriber.

4. The returns are transparent in nature. 

5. NPS provides you two types of accounts

1. TIER-I

TIER-I is mandatory retirement account. For investments in a TIER-I account, currently, in case of retirement, when a person attains the age of 60, he/she can withdraw up to 60% of the total corpus as a lump sum, while one needs to subscribe to an annuity plan with the remaining 40%. According to the new rules of NPS, subscribers can withdraw the entire corpus if it is less than or equal to ₹5 lakhs without purchasing an annuity plan. These withdrawals are tax-free; however, an annuity is taxable as per the income slab. (Separate withdrawal rules apply if one wishes to retire voluntarily before the age of superannuation.)

2. TIER-II

Tier II is a voluntary saving account. Tier II offers greater flexibility in terms of withdrawal, unlike Tier I account, you can withdraw from your TIER-II account at any point of time. Investments in TIER-II account is not eligible for any tax benefit.

Opening and accessing NPS account online

Opening and accessing NPS online is a hassle-free process requiring one-time KYC and bank account details. Find below the links for seamless account opening and accessing existing account:

Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute professional advice. While full efforts have been made to ensure the accuracy of data and numbers, no responsibility is taken for any errors or omissions. Tax implications on insurance, investments and returns from related products may change due to updates in tax laws. Always consult with your financial advisor or insurance expert before making any investment or insurance decisions. The author is not responsible for any financial losses or damages incurred as a result of relying on the information in this blog.

Read: Tax Benefits on contribution to NPS