written by | April 29, 2022

National Pension Scheme (NPS): Benefits & How to Apply

The Government of India launched the national pension scheme (NPS), a pension as well as investment plan to provide security for old age to citizens of India. This offers a long-term savings option to plan your retirement by investing in regulated markets. Individuals receive a lump sum and regular income upon reaching retirement age, allowing them to retire stress-free.

Any Indian citizen, whether resident or non-resident/overseas citizen of India (OCI), can apply for an NPS account opening. The NPS scheme requires that applicants be between 18 years to 70 years, although an NPS account cannot be opened after 75 years.

Did You Know?

The data on the number of beneficiaries as of 31st March 2022 under the NPS is stunning. There were 22,83,671 subscribers in the central government sector, contributing ₹1,50,491 crores. If we consider all sectors, there were 1,57,44,183 subscribers, contributing a total of ₹5,27,883 crores!

Also Read: What Are National Saving Certificate and NSC Interest Rates in 2022?

What is the NPS Scheme?

The national pension scheme (NPS) is easily accessible, affordable, tax-efficient and flexible. You can use it to save for retirement. The NPS allows the individual to contribute to his retirement account, and his employer can co-contribute to the individual's social security/welfare.

NPS works on a defined contribution basis. Subscribers contribute to their accounts, and there is no defined benefit at the time of exit. The accumulated wealth is dependent on the contributions and income from such wealth investments. The more contributions you make, the better the investments. The longer the term, the higher the potential benefit to the pension wealth.

The Objective of the National Pension System

  • This allows people to meet their spending requirements and live a comfortable post-retirement lifestyle.
  • Financial planning should include the creation of enough wealth for retirement.
  • This scheme enables systemised savings to be made during one's working years. It encourages financial discipline and helps individuals save for the future.
  • The Indian government introduced schemes such as the national pension system (NPS) to address the concern about the increasing senior citizen population.

NPS Benefits

The NPS central recordkeeping agency lists two broad categories of Indian residents aged 18-65 as of the date of submission of the NPS application.

Government Sector

State Government

Several state governments adopted the same architecture as the Central Government and implemented the NPS at different times. An Autonomous State Body (SAB) can adopt NPS if the relevant State Government or Union Territory has adopted NPS architecture and initiated implementation. Employees of the State Government or SAB contribute to their pension from their monthly salaries and a matching contribution by their employer.

Central Government

The central government implemented the NPS with an exception in the armed forces.

All central autonomous bodies employees (CAB) who joined before or after the NPS introduction date get coverage by the NPS government sector. Employees get a pension from CAB or the central Government from their monthly salaries and matching contributions from their employers.

NPS Scheme Eligibility

This pension scheme is different from other schemes. It allows Indian citizens to subscribe, whether they are NRIs (non-resident Indians). Other pension plans don't offer such luxuries. The minimum age for joining is 18-to-60 years. Subscribers must also provide KYC documents (CS-S1 & CS-S2) for subscriber registration forms.

Non-Government/Private Sector

All Citizens of India

Anyone who doesn't get coverage by one of the sectors mentioned above can join the NPS architecture of the All Citizens of India Sector starting from May 1, 2009.

Corporates

NPS Corporate Sector Model is a customised version of NPS that various organisations and employees can use to adopt NPS in their workplace relationships.

NPS Maximum Limit

The limit on the number of contributions a subscriber could make per year under section 80CCD had been reduced to ₹1 lakh. However, it was increased to ₹1.5 lakhs in the 2015 budget. A subsection (1B) was added to this contribution. Subscribers can make additional contributions of ₹50,000 over the ₹1.5 lakhs limit. Subscribers to the national pension scheme are now eligible for a tax rebate amounting to ₹2 lakhs under sections 80C and 80CCD.

NPS Helpline

The NPS helpline can answer any questions, such as if the NPS makes sense for investment, its facets and how to enrol. You can reach the national pension scheme helpline at (022-2499 3499).

Also Read: Learn about Allowances and Deductions available to a Salaried person

How to Apply for an NPS Account?

Through the online platform eNPS, people can register for and receive a subscription to the national pension system. Carry the below steps to register for this scheme.

  1. Visit the original website for the national pension system's eNPS portal.
  2. Select your sort of subscriber from the 'Individual Subscriber' and 'Corporate Subscriber' options.
  3. Select the best residential status for you. There are two options: 'NRI' and 'Citizen of India.' 
  4. You can achieve long-term savings by choosing either the first tier or both accounts.
  5. Include your PAN information and choose a PoP or bank that is suitable. Choosing a PoP with a person with an existing relationship is ideal, such as a current account, savings account, or Demat, for KYC verification, as the selected PoP will do.
  6. Send your PAN Card's scanned copy along with a cheque. You can upload the image in.jpg or.jpeg format. The file size should be between 4KB-2MB.
  7. After that, upload your scanned signature and photograph in a similar format as above.
  8. Once you have been routed to the payment path, pay the charges through net Banking.
  9. Your PRAN (permanent retirement account number) will be generated after payment is completed.

How to Apply for an NPS Account Offline

You will need to locate a PoP (Point of Presence) to open an NPS account manually or offline. This could be a bank. You will need a subscriber form to be collected from the nearest PoP. Your KYC documents must accompany this. You don't need to be KYC-compliant if you already have that bank.

Once you have made the initial contribution of ₹500, ₹250 per month, or ₹1,000 annually, the PoP will issue a PRAN (permanent retirement account number).

This number and the password from your sealed welcome package will help you manage your account. The one-time registration fee for this method is ₹125.

How to Log in to Your NPS Account

  1. To log in to your NPS account, you must have a 12-digit permanent retirement account number. For PRAN, you must submit the required documentation to the NSDL website.
  2. Go to https://enps.kfintech.com/login/login/ to access the eNPS login page.
  3. If you're a new visitor to our site and don't remember your password, click the "Generate/Reset Password" button at the bottom of the page.
  4. Enter your PRAN, birth date and captcha to generate an OTP. Click the "Submit" button.
  5. Your registered mobile number will receive a one time password (OTP). Once you enter the OTP, your password will be valid.
  6. Enter your password and PRAN on the login screen. Click the "Login" option.
  7. You will be directed to the homepage of your account.

Conclusion

So, that was all about the national pension system (NPS)! Any Indian citizen between the age of 18 to 70 can open an NPS account. Subscribers may open an NPS account by making a lump-sum contribution of ₹1,000 in a financial calendar or per month instalments of ₹500.

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FAQs

Q: What are Tier-I and Tier-II accounts?

Ans:

Tier-I is a mandatory account, while Tier-II is a voluntary account. The big contrast between these two is in the money withdrawal. You cannot withdraw the whole money from the Tier-I account until you're retired. Even on retirement, there are a few restrictions on withdrawal if you're using a Tier-I account. The subscriber can withdraw the whole money from the Tier-II account.

Q: Can I Join NPS if I am an NRI?

Ans:

Yes, it's among India's very few pension schemes that allow NRIs to join. Most importantly, there is hardly any extra paperwork needed. However, your NPS account will be closed if your citizenship status changes.

Q: Which bank is best for NPS?

Ans:

Currently, the HDFC pension fund offers a maximum 17.14% return for a 5-year term. There are many other choices also. Most importantly, there's just a slight difference in return percentage among the contenders.

Q: What are the NPS tax benefits?

Ans:

NPS benefits include the following:

  • NPS subscribers (salaried employees) can claim a deduction on their benefaction to NPS of up to the salary's 10% (basic plus dearness allowance).

The self-employed NPS subscribers can avail of a 20% tax deduction of their gross income or ₹1,50,000, whichever is less.

Q: What is the NPS scheme?

Ans:

NPS is a pension as well as an investment scheme from the Indian government. This scheme brings a great long-term saving avenue to plan your retirement through regulated and safe market-based returns.

Q: What is the NPS full form?

Ans:

NPS stands for National Pension System.

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