What is NPS?

NPS or National Pension Scheme is a government sponsored pension scheme that was launched in 2004 for government employees. However, in 2009, it was opened to all sections of the public. Once you join this scheme, you can make regular contributions during your working life to your pension account. Upon retirement, 60 percent of the corpus is tax free and available for withdrawal as a lump sum. The rest of it can be used to buy an annuity to provide for regular income in old age.  

Who can apply?

If you are a citizen of India between 18 to 65 years of age, you are eligible to open an NPS account. You may either reside in India or be an NRI. However, the account will be closed if an NRI changes citizenship status from an Indian to that of another nationality.

How can I open an account?

It is to be noted that an individual can open only one NPS account. Multiple accounts in the name of one person are not allowed. The Pension Fund Regulatory and Development Authority (PFRDA) has authorised entities known as points of presence or POPs, which include banks, both public and private and several other financial institutions. Finserv MARKETS offers a hassle free and paperless process to help you open your NPS account. No need to visit the branch office to open an account. All you need is an active mobile number, an email id and a bank account. Log on to the website and enter the amount that you would like to invest in the scheme. Proceed to make the payment and provide your KYC or Know your customer details. Upon verification, you will be allotted, a 12 digit unique number called PRAN or Permanent Retirement Account Number. This completes your subscription to NPS.

Linking Aadhaar with NPS account

For existing NPS users, PFRDA has made the linking of your 12 digit Aadhaar number with your PRAN easier. The whole process takes a few minutes online and saves time as well as effort. Log in to your NPS account on Finserv MARKETS and click on the option ‘update details’. After that, select the option of “add Aadhar no” and enter it. Make sure that you enter the 12 digit number correctly. Before submitting the Aadhar, an OTP will be sent to your mobile number that you have registered with UIDAI. This is only for authentication purposes.

Once you have received the OTP on your phone successfully, you will see that your Aadhaar has been linked to your NPS account. In case you want to edit your Aadhar details, you can do the same by clicking on “Edit Aadhar no”. You also have an option to change your photo in case you are not satisfied with the one on your Aadhar card. Make sure that the name entered on your Aadhar card and PRAN is the same or else you would need to submit a self-attested copy of your Aadhar card along with PRAN card for name change.

Types of NPS accounts

NPS scheme on Finserv MARKETS offers two accounts: Tier I and Tier II. While Tier I is a mandatory account, Tier II is voluntary. You can either open it or not. The main difference between the two accounts is the withdrawal of money invested in them. You cannot withdraw the entire money from Tier I account till your retirement. Even on retirement there are restrictions on withdrawal. Whereas, a subscriber can withdraw the entire amount from Tier II account. All investments related to tax saving happen through the Tier I account.

How does NPS work?

The money invested in NPS is managed by PFRDA registered pension fund managers. There are a total of eight pension fund managers as of now. You can either choose to invest actively or go for the auto choice option. While in the former, the investor decides how the money should be invested in various asset classes, the auto choice or lifecycle fund is the default option which invests money automatically in line with the age of the subscriber.

Active choice further offers three funds or investment options: Asset class E( invests 50 percent in stocks), Asset class C( invests in fixed income instruments other than government securities) and Asset class G (invests only in government securities). You can choose from each of these funds or opt for a combination as per your choice, when you manage your NPS account on Finserv MARKETS.

What are the benefits of NPS?

Tax benefit: An additional deduction of Rs 50,000 is offered under section 80CCD(1B) of Income tax, which is in addition to Rs 1.5 lakh permitted under section 80C. An employee’s own contribution is eligible for tax deduction upto 10 percent of the salary, under Section 80CCD(1) of the Income tax Act. The employer’s contribution to NPS is exempted under Section 80CCD(2). A self employed person can also contribute 10 percent of his gross income under section 80CCD(1) in NPS.

Flexibility of choice: Depending on your life stage, you can choose different investment options and fund managers or a combination of both. This makes NPS a flexible investment tool that you can use to grow your wealth. You decide when you want to switch fund managers or drop and pick new ones.

Online accessibility and tracking: On Finserv MARKETS, you no longer have to be visiting your bank branch in real time, to know the status of your NPS account. Whether you change jobs and move to a different city, or are in a transferable job, you can access your account from anywhere at the click of a button. Just log in and manage your account, track your investments on the go and stay updated.

Choose your investment distribution: Unlike other government regulated instruments, NPS gives you the power to choose whether you want to actively manage your investment or let the automated lifecycle fund take care of your money. If you choose to invest actively, you decide the percentage of funds to be allocated to equities, government securities and corporate bonds. Else just sit back and let the auto choice work for you as per your lifestage.

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