Planning for retirement is extremely important for a comfortable financially secure life in the golden period of life. A well-created retirement corpus will help to leave a joyous retirement life wherein finances will never be a worry.
The National Pension Scheme is one retirement cum pension scheme that helps to avail the double benefit of both retirement planning as well as tax-saving and has been introduced by the Indian government.
The NPS Tier-I account is not only a retirement account but also a primary NPS account. This means that an NPS Tier-II account can only be opened after the NPS Tier-I account has been opened.
The Tier-I NPS account is the focus to fulfil the needs of the pension for both the private and public sector employees.
The following is the eligibility criteria for opening the NPS Tier-I account:
When planning to invest in the NPS Tier-I account, a choice of two investments strategies is available, which are active and auto choice strategy. The active choice strategy is when investing in the choice of investment funds whereas under the auto choice strategy the investment is then allocated to funds in the ratio predetermined on the premise of the risk profile. The investment funds available within the National Pension Scheme are listed below:
To manage the investment, the following are the eight pension fund managers registered with the PFRDA that one may choose:
One can easily switch between the investment funds and investment strategy as per the need. On the premise of the underlying asset's performance, the investment will grow and earn a return.
The following are the important documents required to open the NPS Tier-I account:
Any individual who is looking forward to opening the NPS Tier-I account should have a PAN card, Aadhar card and bank account.
It is to open the NPS Tier-I account both online as well as offline. First, take a look below to understand opening the NPS Tier-I account offline:
To open the NPS Tier-I account online, follow the steps below:
An individual can make up to three partial withdrawals from the NPS Tier-I account. The withdrawals can be made three years after the account opening.
It can be made on grounds such as the buying of a house, higher education of children, medical treatment, and so forth.
The withdrawals cannot exceed 25% in aggregate of the contributions and remain tax-free.
The NPS Tier-I account will mature at 60 years of age and up to 60 per cent of the NPS corpus can be withdrawn. In case individual wishes to buy an annuity then 40% of the remaining balance can be utilized.
An individual can opt for the premature exit before 60 years of age provided the NPS account has completed three years. Under such a situation, 20% of the maximum corpus can be withdrawn, which is a taxable withdrawal. 80% of the balance would be converted to an annuity.
In case individual wishes to withdraw from the NPS Tier-I account, simply log into the NPS account and provide the details such as the PRAN and birth date. Post the log-in the withdrawals can be made into the account.
Or else visit the nearby branch of the NPS Point-of-Presence and submit the request withdrawal form.
Submit the request to close the NPS Tier-I account form by logging into the account online. Besides, one can also visit the nearby branch of the NPS Point-of-Presence and submit the closure form.
Take a look below to understand the following tax benefits: