How to Open an Online NPS Account?

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Opening a National Pension System account earlier was an arduous process. But, with the introduction of eNPS, opening an online NPS account takes no more than 30 minutes! It has made the process more seamless, time saving, and easy. 

eNPS facilitates you in opening a personal Pension account under the NPS scheme. 

With e-NPS you can open only a Tier-I account or both Tier-I and Tier-II accounts. 

Having an online NPS account makes initial and further contributions to the scheme easy! 

Definition of National Pension Scheme (NPS)

NPS is a contribution based pension scheme that is launched by the Government of India with an objective of extending the old age retirement fund to all the citizens that opt for this scheme.  It is regulated and managed by the PFRDA (Pension Fund Regulatory and Development Authority).

Although, initially it was launched only for the government employees, it was subsequently extended to even non-government citizens in 2009. Also, being a market-linked product, NPS offers the returns based on the performance of fund.

Types of NPS Account:

Under National Pension Scheme, an individual can open two types of account, viz. TIER I and TIER II.

  • Tier I Account:

Tier I account is a non-withdrawal permanent retirement account. Before 2011, it had a lock-in period until the subscriber reaches the age of 60 years. However, PFRDA, the regulatory body has introduced few changes in the year 2011. As per the new regulations, the subscribers are permitted for premature withdrawals after the completion of 15 years in the service.

It’s noteworthy that the premature withdrawals are done in the form of repayable advances. One is also allowed to withdraw up to 50% of her/his contribution after completing 25 years of her/his service. These withdrawals will help the subscribers handle different events like critical illness, etc. that require urgent financial assistance.

  • Tier-II Account: 

NPS TIER-II account allows you to have unlimited withdrawals. It works just like a savings account. The only difference is that the process of withdrawing money in this account is bit more tedious as compared to savings account.

However, it’s important to understand that an NPS Tier II account can only be opened when one already has an active Tier I account.

The minimum contribution in an NPS Tier I account is of Rs 500 monthly and Rs 6000 for a year. On the other hand, in a Tier II account, the minimum contribution is of Rs 1000 there will be a charge of Rs 250 for subsequent transaction.

Ways to Open an e-NPS Account

If you have a bank account in one of the 17 that are registered at the NSDL (National Securities Depository Ltd), you can easily open a NPS account online. 

If your PAN details are linked to your savings account, you can simply log on to the eNPS official website and apply for their online account! 

Your bank will take care of the KYC for and processing of your application. 

Another way you can open an e-NPS account is if you have a Aadhaar card. The PFRDA (Pension Fund Regulatory Authority) approved Aadhaar as e-KYC on 17th February, 2016. 

But it needs to be linked to your mobile and savings account number. 

You will then receive an OTP on the registered cellphone number for verification! 

Remember to activate your online banking facility before applying for an eNPS account! 

How to Open a NPS Account Online

There are two ways you can open your NPS account online. 

If you register using your Aadhaar Card

  • Your Aadhaar number should be linked to your mobile number.
  • The NPS KYC will be done through your registered mobile number by sending an OTP to it for authentication purposes.
  • Your data along with the picture will be extracted from the Aadhaar database and used in the NPS online form.
  • The rest of the mandatory details have to be completed by you online.
  • For registration purposes, upload your signature in a .jpg or .jpeg format. The file should be sized between 4 to 12kb.
  • You can replace your Aadhaar picture by uploading a new one in its stead.
  • You can then simply make the initial contribution to your e-NPS account through Net Banking or Credit/Debit Card. 

If you register using your PAN Card

  • In this case, the KYC is taken care of by the bank. That is why your savings account needs to be in an NSDL empanelled bank.
  • The details filled by you on the online form for NPS account should match the details already with your bank. If they don’t match the bank can deny your registration application and you would then have to contact the bank personally.
  • Fill in all the mandatory fields.
  • Upload a scanned picture and signature.
  • You will have to use Internet Banking to make the initial contribution.                                                                  

An NRI can open an e-NPS account too! 

You would need to choose the status of your bank account, whether it is repatriable or not. 

Next you should furnish details of your NRO or NRE account and upload the passport’s scanned image. 

Lastly, select where you want your communication from e-NPS, at the permanent address in India or abroad. 

Remember that overseas communication will be charged extra. 

Permanent Retirement Account Number (PRAN)

Once the application is submitted online, you will be allotted your individual PRAN number

For a Tier-I account that has had PRAN generated through Aadhaar Card, they can opt to either eSign their application or print and courier it to the eNPS processing centre. 

A copy of the e-signed document need not be sent to the eNPS processing centre. Also there will be a charge of Rs.5 + service tax for e-signing. 

If you are printing and couriering the form, remember to paste the photograph. Don’t sign across it, and neither should you pin, clip, or staple it! 

Remember to send the forms to the processing centre of eNPS within 90 days of allotment of PRAN or it will be ‘frozen’ temporarily. 

Gain Count of Having a NPS Account

Let us tabulate what different kind of investors earn when they invest their funds through their Tier-I accounts in NPS. 

Asset Mix of NPS Funds

Allocation by Investors

Equity (in %)

Corporate Bonds (in %)

Gllts (in %)

Ultra safe

0

40

60

Conservative

20

30

50

Balanced

33

33

33

Aggressive

50

30

20

 

*the data is as on date March 4th, 2016. 

SIP Returns

Allocation by Investors

3 Years (%)

5 Years (%)

Ultra safe

8.91

9.29

Conservative

8.08

9.06

Balanced

6.82

8.43

Aggressive

6.71

8.55

 

*the data is as on date March 4th, 2016. 

Offline NPS Account Opening

You can open NPS accounts offline as well. 

First you need to find a PoP or Point of Presence near you. There are 63+ PoPs that can assist you in this. 

Several banks act as intermediaries that can help you open your NPS accounts, do the KYC, and receive contributions to your NPS accounts. 

You will be given a registration form to fill. Select the relevant options, fill out the details neatly and correctly, and submit it along with all your KYC documents. 

You will be charged Rs.125 as PoP charges for account opening. 

Once the PRAN is allotted to you, you will receive all the relevant information and passwords from the CRA (Central Record keeping Agency, eNPS processing centre. 

Investing in NPS

Tax benefit by investing in NPS can be benefitted under Section 80C of the Income Tax Act. 

A maximum of Rs.150,000 can be claimed as deductions if you invest in NPS along with host of other tax-saving instruments like PPF, ELSS, Life Insurance, etc. 

Also, with Budget 2016 providing an additional benefit of Rs.50,000 to anyone investing in NPS, under Section 80CCD(1b), the Pension scheme has assumed even more importance from individual taxpayers. 

You can use your debit or credit card to make payments in your NPS account. But be warned, there will be a 1% payment charge charged by the payment gateway! 

For people who want to open an eNPS account but whose Aadhaar number and PAN number are still not linked with their saving bank account, will have to wait for the next financial year to invest in NPS! 

This is because, with the financial year drawing to a close, the number of people wanting to avail maximum tax benefits has gone up considerably! 

That is why, application processing is taking about 15 to 20 days. 

The financial year will end before you can receive your PRAN! 

NPS funds to Invest In

You cannot move your money between different NPS funds at your discretion. The investment cannot be withdrawn for a minimum of 1 year! 

Therefore, choosing a correct pension fund is important. 

ICICI Prudential Pension Fund has been a top performer in both 3 and 5 years bandwidth, with its current NAV at 21.10. 

NPS Returns 2016

As per PFRDA, the returns on NPS as on 31st August, 2016 are as follows 

The ranking of NPS funds based on their percentage of return for past 3 years is as follows: 

Top 3

  1. UTI Retirement Solution - 19.78%
  2. ICICI Pension Fund - 19.75%
  3. Kotak Pension Fund - 19.41% 

Whereas, the other pension funds performed as follows:

  • SBI Pension Fund - 19.35%
  • HDFC Pension Fund - 19.12%
  • Reliance Pension Fund - 18.70%
  • LIC Pension Fund - 15.26% 

The Ranking of NPS funds based on their percentage of return for past 5 years is as follows: 

Top 3

  1. ICICI Pension Fund - 14.15%
  2. SBI Pension Fund - 14.11%
  3. UTI Retirement Solution - 14.06% 

The performance of the other pension funds was as follows:

  • Kotak Pension Fund - 13.92%
  • Reliance Pension Fund - 13.53%

LIC Pension Fund and HDFC Pension Fund were launched in 2013 only, that is why there are no comparative performance figures for them over a 5 year period. 

ICICI Pension Fund has been consistently performing over the years yielding good returns. 

Where base average return for 3 years for Tier-I NPS funds was 13.15%, ICICI Pension Fund gave a return of 13.38%! 

Average Standard Deviation was 5.72, and ICICI Pension Fund scored a whopping 6.24! 

The best fund manager differs for each Tier in the NPS scheme. Investing in them should be judged according to their performance over the years. 

To Conclude

Contributions to the eNPS account can be done through SBI ePay for both Tier-I and Tier-II subscribers. 

A total of 44 banks are associated with the SBI ePay. The same can be checked at the NSDL official site. 

eNPS facility is is not available for those who have already enrolled themselves under the APY or Atal Pension Yojna. 

Once you have opened your online NPS account you have to make a payment into your eNPS account. Minimum payment that you can make is of Rs.500. 

According to PFRDA, as on 17th February, 2016, 2,411 NPS accounts were opened online using the PAN e-KYC method. Whereas, 2,573 online NPS accounts were activated by Aadhaar e-KYC!

National Pension Scheme (NPS) Accounts FAQs:

1. What does NPS mean?

NPS (National Pension System) scheme is regulated by PFRDA (Pension Fund Regulatory and Development Authority). It is an investment cum pension scheme sponsored by Government of India to provide pension service and hence, old age security to all citizens of India. This programme was initially introduced as a retirement tool only meant for government employees; however, was later extended for general public access, too.

2. How is NPS calculated?

Your monthly contribution towards NPS is the deciding factor when it comes to calculating your NPS corpus. The more you invest, the more the accumulated amount and hence, larger would be the accumulated pension corpus. The overall NPS is calculated based on monthly compounding.

3. How does National Pension Scheme work?

Under the NPS scheme, the subscribers are allowed to contribute a fixed amount in a pension account for a regular period of time while they are still working. Subscribe can take out a part of this retirement corpus once they retire and use the remaining corpus to invest in an annuity which will allow them to secure a regular source of income after retirement.

 4. Can I have two NPS account?

No, there is only one NPS account approved per subscriber. Furthermore, as NPS is portable across locations and sectors, therefore, there is no need to open a second NPS account.

5. What is 80ccd in income tax?

The Section 80CCD is a special provision under Income-tax Act, 1961 that provides tax rebate to the income tax assessees who are making contributions to the NPS (National Pension Scheme).

6. What is the tax benefit of NPS?

  • Under National Pension Scheme, an employee’s contribution qualifies for a tax rebate of up to 10% of her/his salary u/s 80CCD (1) of the IT Act. It’s important to understand that this tax rebate is only applicable within the total ceiling of up to Rs 1.5 Lakh and is applicable u/s 80C and Section 80CCE. 
  • The contribution made by your employer to your NPS account is also eligible for tax rebate u/s 80CCD (2). 
  • Besides the overall ceiling of Rs 1.5 Lakh, individuals can also claim an additional rebate of up to Rs 50,000 u/s 80CCD (1B).
  • A self-employed person can also contribute 10% of his gross income u/s 80CCD (1) in NPS. 

 7. What is the lock in period for NPS?

NPS has the longest lock-in period, as any withdrawal from your NPS account can only happen once you’ve reached the age of 6o years.

It means that, if you open an NPS account at the age of 25-30, the lock-in period for your NPS account will be of 30-35 years. 

In addition to that, you can withdraw only 60% of the corpus and the remaining 40% is put into an annuity which will help you get a monthly pension.

8. What is the minimum contribution to NPS?

PFRDA has substantially lowered the minimum annual contribution to Rs 1000 per year to an NPS account to encourage more people to join the NPS scheme.

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