The National Pension System (NPS) is a retirement savings plan supported by the government that aims to assist individuals in creating a pension fund for their needs. It offers a cost-effective method to save for retirement and obtain tax advantages. 

Creating an NPS account is a simple process that can be completed conveniently using your bank’s mobile banking app or Internet banking platform. It’s wise to secure an income after retirement, which brings a sense of reassurance for the years ahead. This post will discuss all about the NPS account opening process, eligibility, documents, and how beneficial it is for you. 

NPS Explained 

The National Pension System (earlier called the National Pension Scheme) is a smart choice for people who want to save for their senior years. This government-backed retirement savings plan helps build a strong financial foundation for life after retirement. Individuals aged between 18 and 70 years are eligible to open the NPS Account. This is an excellent system to encourage the habit of saving for your future. 

The NPS offers two account options – Tier I and Tier II. Opening a Tier I account is mandatory to open a Tier II account. You cannot withdraw funds from a Tier I account until retirement. This encourages a habit of disciplined saving. Contributions to Tier I accounts are tax deductible under Sections 80C and 80CCD(1B) of the Income Tax Act. On the other hand, Tier II is voluntary. It allows investors more flexibility to access their funds without associated tax advantages.

How Does NPS Work?

NPS allows individuals to invest in various asset classes, such as equities, corporate bonds, and government securities. You can start investing regularly from the age of 18 years for long-term financial growth through compound interest. It offers tax benefits on contributions under Sections 80C and 80CCD(1B) of the Income Tax Act. You can withdraw 60% of the corpus at your retirement and use the remaining 40% to purchase an annuity plan—A simple and effective way to save for a financially stable retirement ahead. 

Why Invest in NPS?

Let us look at the numerous benefits of investing in NPS:

• Expert Fund Management

Proficient pension fund managers oversee NPS funds, maximising returns while minimising risks. These experts ensure the effective management of your investments. 

• Tax Advantages

NPS has appealing tax benefits that make it a favoured option among investors. Contributions to the NPS Tier I account qualify for tax deductions up to Rs. 1.5 Lakh under Section 80C. Additionally, you can claim an extra deduction of up to Rs. 50,000 under Section 80CCD(1B), over and above the Rs. 1.5 Lakh limit.  It not only helps with tax savings but also secures your retirement savings.

• Flexible Withdrawal

When it comes to retirement security, NPS is designed to offer stability during your later years. Upon reaching the age of 60 years, you can withdraw 60% of your savings as a lump sum while using the remaining 40% to secure an annuity. This setup ensures a pension after retirement, bringing peace of mind and financial stability.

• Accessible and Convenient 

NPS is open to all citizens aged between 18 and 70 years, making it accessible to many. It can be managed through the user-friendly digital channels of leading banks like ICICI Bank to manage contributions and withdrawals conveniently.

NPS Account Opening Eligibility

Here are the key NPS eligibility criteria:

1. Applicants must be between the ages of 18 and 70 years.

2. Adherence to KYC standards is necessary. Make sure you send in all the paperwork required for KYC verification.

3. Persons of Indian Origin (PIOs) and Hindu Undivided Families (HUFs) are not eligible to open an NPS account. 

4. NPS accounts cannot be created on someone else’s behalf.  

Documents Needed for NPS Account Opening

Here are the mandatory documents needed to open an NPS account:-

• A recent photograph
• PAN card
• Address proof
• Bank account details

Steps to Open an NPS Account Online

You can easily open the NPS Account through your bank’s digital platforms, like Internet banking or a mobile banking app like the iMobile app. Below is how to open an NPS account online:

NPS Account through mobile banking app:

1. Log in to your mobile banking account.
2. Click the “Invest” section, find the “NPS” feature and click ‘Invest now’.
3. Fill in all the required details, such as your investment amount, personal information, and nominee details.
4. Now, upload your photo and signature.
5. After verifying the information, submit your application through the app.

NPS Account through Net Banking:

1.  Log in to your Net Banking using your credentials.
2. Find the section “Investments and Insurance”.
3. Next, click “National Pension System”.
4.  Fill in your investment amount, personal information, and nominee details.
5.  Next, upload your photo and signature.
6.  Confirm the details and click “Submit”.

To avoid account freezing, your first contribution to the NPS account must be made online within 45 days of PRAN generation.

Conclusion 

NPS is a wise choice for those planning their financial security post-retirement in the long run. It is a cost-effective and flexible investment option. The NPS account opening online is a simple, hassle-free process through mobile apps or internet banking. Contributions to an NPS account offer tax benefits, helping individuals save on taxes while securing their future. This makes it easy for individuals to start early, benefit from compounding, and build a secure financial foundation for a worry-free retirement.