Proper and Meticulous financial planning is necessary to ensure investors can spend their life after retirement in utmost comfort and relief without any stress. Today, there are multiple options when it comes to securing funds for post-retirement life. The Government also endorses several retirement & pension plans customized for this objective.
The National Pension Scheme is one such government-sponsored option that allows investors to create wealth and secure a corpus for their post-retirement life through a disciplined framework for investment & regular savings. It is also one of the few government-sponsored pension schemes that do not bear a specific interest return. NPS interest rates are market-linked, so they are subject to fluctuations based on the market conditions.
TYPES OF ACCOUNTS
- Tier I Account:
This is a permanent non-withdrawal retirement account. Upon opting for the NPS Tier 1 Account, the investor is allotted a PRAN (Permanent Retirement Number). This is a unique identification number for each investor.
The minimum amount for investment is Rs. 500, and after that, Rs. 1,000 or above needs to be contributed every year to keep the account alive.
It allows only 60 percent of the corpus to be withdrawn as a lump sum at the time of maturity. No tax is levied on this 60% of the corpus.
- Tier II Account:
This is a savings cum voluntary retirement alternative. The account can opt only if one has a Tier I account. A Tier II account offers more convenience and flexibility when compared to a Tier I account in terms of deposits and withdrawals. There are no withdrawal rules for this account.
The minimum amount to be invested is Rs. 1,000. However, it’s not compulsory to invest every year like the Tier I account and does not require the investor to maintain a minimum balance in a year. Thus, investors can invest or withdraw funds at any time as per their needs and feasibility.
OFFLINE NPS REGISTRATION
To register for the NPS offline, investors will need to visit the nearest branch of POOP-SP which is the point of Presence - Service Providers, and collect the NPS registration form. They can also get the registration form on the NPS official website. Once this form is duly filled with all the required details, one can go ahead and submit it to the POP-SP along with all the needful documents.
ONLINE NPS REGISTRATION
There are two ways you can register for NPS online
1. By using Aadhar Card:
- The aadhar card must be linked with your mobile number.
- The NPS KYC will be done by your registered number through an OTP for authentication purposes.
- The data from the aadhar will be extracted and the other mandatory details have to be filled in on the portal.
- The signature will need to be uploaded in a .jpg or .jpeg format. The file should be sized between 4 to 12 kb.
- Then, investors can simply make the initial investment to the e-NPS account through Net Banking or Credit/Debit Card.
2. By using your PAN Card:
- Here, the KYC will be taken care of by the bank. This is why an investor’s saving bank account should be in an NSDL empanelled bank.
- The details filled on the online form should match the details already with the bank. As, if they do not, the bank can deny your registration application and you would have to contact the bank personally.
- Fill up all the needful details.
- Upload a scanned signature and picture.
- Now, you will need to use internet banking to make the initial investment.
- U/s 80CCD(1), up to Rs. 1,50,000 deduction is allowed.
- U/s 80CCD(2), 10% of the salary contributed by the employer above and over section 80CCD(1)
- U/s 80CCD(1b), up to Rs. 50,000 deductions above and over both mentioned sections.
WHO SHOULD INVEST?
NPS is open to all Indian resident citizens between the ages of 18 to 60 yrs. Investors looking for better returns than what is offered in other similar retirement planning options can consider NPS for building their wealth and retirement corpus. Nevertheless, as the scheme offers very low liquidity, investors can go forward with investing in mutual funds for their retirement as they could also offer potentially higher returns along with high liquidity.