Post Office National Pension Scheme (NPS)

Eligibility Criteria  

1. Opening an NPS account under the all-citizen model is accessible to any Indian citizen, regardless of their current location within the country or abroad. 
2. To qualify for opening an NPS account, the applicant must be within the age range of 18 years to 70 years at the time of submitting the application. 
3. Additionally, adherence to the prescribed Know Your Customer (KYC) norms is mandatory for eligibility to open an NPS account. 

Advantages of NPS Account 

1. Cost-effectiveness: NPS stands out as one of the world's most cost-effective pension schemes, with minimal administrative charges and fund management fees. 
2. Simplicity: Opening an NPS account entails a straightforward process. Applicants need only establish an account with any Point of Presence (POP) available at Head Post Offices nationwide and obtain a Permanent Retirement Account Number (PRAN). 
3. Flexibility: Subscribers have the flexibility to select their preferred investment option and Pension Fund (PF) or opt for the auto choice feature to maximise returns. 
4. Portability: NPS accounts offer portability, allowing subscribers to manage their accounts from any location in the country and make contributions through any POP-SP, regardless of the branch affiliation.
5. Contributions can also be made via eNPS. Moreover, accounts can be transferred to different sectors, such as the government sector or corporate model, if the subscriber changes employment. 

Tax Benefit for Employees 

Employees who contribute to the National Pension System (NPS) are entitled to tax benefits on both their own contributions and their employer's contributions as follows: 

1. Employee's Contribution: Eligible for a tax deduction of up to 10% of salary (basic + DA) under Section 80 CCD(1), within the overall limit of Rs. 1.50 lakh under Section 80 CCE. 
2. Employer's Contribution: The employee can avail of a tax deduction on the employer's contribution of up to 10% of salary (basic + DA) under Section 80 CCD(2), exceeding the limit of Rs. 1.50 lakh provided under Section 80 CCE. 
3. Tax Benefit for Self-employed Individuals: Self-employed individuals can also avail tax deductions under NPS as follows: 

1. Eligible for tax deduction of up to 10% of gross income under Section 80 CCD(1), within the overall limit of Rs. 1.50 lakh under Section 80 CCE. 
2. Additionally, subscribers can claim an additional deduction for contributions made to their NPS account under Section 80 CCD(1B), subject to a maximum investment of Rs. 50,000. 

Note: Tax benefits are applicable as per the provisions of the Income Tax Act, 1961, as amended from time to time. 

Account Types 

1. Tier-I Account: This account serves as a repository for retirement savings and entails restricted withdrawals. It qualifies as a retirement account, offering potential tax benefits subject to prevailing Income Tax regulations. 
2. Tier-II Account: Offering voluntary savings options, this account allows individuals to withdraw funds at their discretion. It doesn't serve as a retirement account and doesn't confer tax benefits on contributions. 

Contributions 

Contribution methods include cash, local cheques, demand drafts, or Electronic Clearing System (ECS) at the chosen Point of Presence - Service Provider (POP-SP). For cash transactions exceeding Rs. 50,000, submission of a copy of the PAN card is mandatory as per Anti-Money Laundering (AML) regulations. Outstation cheques are not accepted. 

Minimum Contributions (Tier-I): 

1. Minimum contribution at account opening and for subsequent transactions: Rs. 500 
2. Minimum annual contribution: Rs. 1,000 (excluding charges and taxes) 
3. Minimum number of contributions per year: 01 

Penalties for Non-compliance with Minimum Contributions: Contributions below Rs. 1,000 in a year lead to account freezing, restricting CRA facilities such as online account viewing. Reactivation requires a minimum contribution of Rs. 500, and a frozen account closes when its value reaches zero. 

Minimum Contributions (Tier-II): Minimum contribution at account opening: Rs. 1,000, with subsequent transactions requiring a minimum of Rs. 250 per contribution. There's no minimum contribution requirement for the financial year and no maximum contribution cap. 

Opening an NPS Account 

Obtain the PRAN application form from a chosen Point of Presence - Service Provider (POP-SP) or the official website. Complete the form with requisite details, including KYC documentation for proof of identity and address. Submit the form along with KYC documents to the nearest POP-SP. Track the application status using the provided receipt number. Submit the first contribution slip (minimum Rs. 500) along with the application. 

Investment Options 

Within the National Pension System (NPS), the allocation of funds depends on the subscriber's preference. NPS offers a variety of funds and investment options. If a subscriber opts not to make a choice, their funds will be invested according to the Default choice of the 'Moderate Life Cycle Fund' under the 'Auto Choice' option. This fund allocates funds across various schemes based on the subscriber's age. NPS provides two approaches for investing subscriber's funds: 

Active Choice: 

Subscribers have the flexibility to determine how their NPS pension wealth is invested among the following options: 

1. Asset Class E: Predominantly equity market instruments. 
2. Asset Class C: Fixed income instruments excluding Government securities. 
3. Asset Class G: Investments in Government securities. 
4. Asset class A: Alternative Investment Schemes including CMBS, MBS, REITS, AIFs, InvIts, etc. 

Subscribers can allocate their entire pension wealth to C or G asset classes, up to a maximum of 50% in equity (Asset class E), and up to a maximum of 5% in asset class A. They can also distribute their pension wealth across E, C, G, and A asset classes, subject to prescribed conditions by PFRDA. 

Auto Choice (Lifecycle Fund): 

NPS offers a convenient option for participants lacking investment knowledge. If subscribers are unable or unwilling to make a choice regarding asset allocation, their funds will be invested according to the Auto Choice option. 

In this option, investments are made in a lifecycle fund where the proportion of funds allocated across three asset classes is determined by a predefined portfolio adjusted according to the subscriber's age. The exposure to Equity Investments decreases with age, while investments in C & G increase. Three Life Cycle funds are available under this Auto Choice: 

1. LC75: Aggressive Life Cycle Fund: Starting with 75% equity investments until age 35, gradually decreasing with age. 
2. LC50: Moderate Life Cycle Fund: Starting with 50% equity investments until age 35, gradually decreasing with age. 
3. LC 25: Conservative life cycle fund: Starting with 25% equity investments until age 35, gradually decreasing with age. 

The default auto choice if the subscriber does not select any of the above options is the Moderate Life Cycle Fund. 

The subscriber's personal information is protected and will not be disclosed to third parties outside the National Pension System (NPS), including Annuity Service Providers empanelled by PFRDA, without express or implied consent. Information may be used internally or to create awareness of new NPS services, with exceptions for disclosure compelled by law, public duty, or NPS's interest. 

Withdrawal or Exit 

1. Upon Reaching the Age of 60 years: Upon reaching 60 years of age, at least 40% of the gathered pension wealth of the subscriber must be utilised to purchase an annuity-providing monthly pension, while the remaining balance is paid as a lump sum. If the total collected corpus is less than Rs. 5 lakh, the subscriber may opt for a 100% lump sum withdrawal. However, the subscriber has the flexibility to defer the lump sum withdrawal until the age of 75 years. The option to continue contributing up to the age of 75 years must be exercised at least 15 days before turning 60 years old. 
2. Before Reaching the Age of 60 years: A subscriber may exit from NPS before turning 60 years old only after completing 10 years in NPS. At least 80% of the gathered pension wealth must be utilised to purchase an annuity-providing monthly pension, while the remaining balance is paid as a lump sum. If the total collected corpus is less than Rs. 2.5 lakh, the subscriber may opt for a 100% lump sum withdrawal. 
3. Death of the Subscriber: In the unfortunate event of the subscriber's demise, the nominee has the option to receive 100% of the NPS pension wealth as a lump sum. However, if the nominee wants to continue with the NPS, she or he must subscribe to the NPS individually after completing the necessary KYC procedure. 

Under the National Pension System, the Pension Fund Regulatory and Development Authority (PFRDA) has entrusted the responsibility of receiving, processing, and settling all withdrawal claims to the Central Recordkeeping Agency (CRA). CRA has established a special NPS claim processing cell (NPSCPC) to handle all types of withdrawal claims. NPSCPC's performance in withdrawal processing is monitored by CRA according to PFRDA's instructions. Currently, NPSCPC is fully operational. The subscribers can submit their withdrawal claims online for NPS. 

Financial Cap: 

1. Minimum Subsequent Contribution: Rs. 500 (excluding taxes) 

1. Minimum Initial Contribution with Registration: Rs. 500 (excluding taxes) 
2. Minimum Contributions in a Financial Year: Rs. 1,000 in Tier I 
3. Maximum Contributions: No limit 
4. Minimum Transactions in a Financial Year: One 

Transactional Charges: 

1. Registration Charges: Rs. 200 (excluding taxes) 
2. Contribution Charges: Rs. 30 (excluding taxes) 
3. All Service Charges (Except All Types of Withdrawals): Rs. 30 (excluding taxes) 
4. All Types of Withdrawals: Rs. 125 (excluding taxes) 

How to Open an NPS Account Online 

Requirements for opening an NPS Account through 'myNPS': 

1. A valid mobile number and email ID. 
2. There are four modes of registration, as detailed below: 

1. Permanent Account Number (PAN) based registration 
2. Aadhaar Paperless Offline eKYC-based registration 
3. Digilocker with Aadhaar or Driving License 
4. CKYC Number 

1. Active bank account with net banking facility with one of the banks linked with payment gateway service provider. 
2. Scanned copy of the photograph (only for PAN-based registration journey) and signature in .jpeg/.jpg/*.png format with file size ranging between 4KB to 5MB each. 

1. Scanned copy of PAN card in .jpeg/.jpg/*.png format with file size between 4KB to 2MB and valid bank account details for penny drop verification (no bank proof upload). 
2. Online payment of initial contribution (minimum amount Rs. 500) through internet banking and UPI. 
3. Subscribers can complete registration through eSign, the registration form, or OTP authentication. 
4. If unable to conduct OTP/eSign authentication, please print the form, affix your photograph (avoid signing across the photograph), and provide a signature. Then, send the form to Protean eGov.  

Note: The form should be attested by the nodal office. For corporate subscriber registration, online payment of the initial contribution is not required. 

Processing of Subsequent Contribution 

Subsequent contributions to Tier I & Tier II accounts can be made by all subscribers, whether registered through online or offline modes, using 'myNPS'. 

To contribute online, follow these steps: 

1. Ensure you have an active Tier I or Tier II account. 
2. Authenticate your PRAN using the OTP sent to your registered mobile number or email ID. 
3. Proceed with the payment through your Internet Banking option (refer to the List of Banks for compatibility). 
4. POP service charges, up to 0.50% of the contribution amount (with a maximum of Rs. 25,000 per transaction and a minimum of Rs. 30 per transaction), will apply. 
5. Contributions through MyNPS are credited to PRANs on a T+2 basis, subject to the receipt of clear funds from the payment gateway service provider. 
6. This module is managed and controlled by the Point of Presence (POP) for subscriber onboarding. 
7. The Point of Presence (POP) is exclusively responsible for all compliances related to its functioning, as per PFRDA regulations, 2018, PMLA, and other applicable guidelines issued by PFRDA. 
8. Any service requirements or grievances should be addressed directly to the POP, which is responsible for resolving these issues. 

Sign up for a SIP within NPS 

Benefits of SIP: 

1. SIP offers a simple and convenient investment method that is free from hassle. 
2. It enables regular, timely, and modest investments, perfect for subscribers aiming to invest a fixed amount periodically without burdening their finances. 
3. SIP eliminates the necessity for lump-sum payments in your NPS account, facilitating better goal-setting and planning. 
4. By consistently investing over a prolonged period, SIP takes advantage of compounding benefits. 
5. With Rupee Cost Averaging, there's no need to time the market. 

Steps for SIP Registration: 

1. Existing subscribers should provide their PRAN number and date of birth, then select either email, mobile number, or both, and click 'Submit OTP'. 
2. Enter the six-digit OTP received and proceeded by clicking 'Continue'. 
3. Choose the option 'New SIP Registration in NPS' and submit. 
4. Fill in details such as SIP Amount, Tier Type, SIP Date, Maturity Month and Year, and SIP Frequency. 
5. Enter bank details for the online e-mandate process. The deduction will be made from the same bank account. Refer to the list of banks for SIP Processing. 
6. Review the entered details for verification, then click 'Continue'. 
7. The SIP registration will be forwarded to the bank for authorisation. Upon successful authorisation, the amount will be debited from the subscriber's bank account based on SIP Amount and Frequency. 
8. Subscribers can monitor the 'Status of SIP Registered' and access the 'List of SIP transactions'. 

Steps for SIP Cancellation: 

1. Existing subscribers need to input their PRAN number and date of birth, then choose either email, mobile number, or both, and click 'Submit OTP'. 
2. Enter the received six-digit OTP and proceed by clicking 'Continue'. 
3. Select 'Cancellation of SIP' and submit. 
4. Choose the SIP ID to be cancelled and click 'Submit'. 
5. Note that SIP cancellation is permitted after the first two SIP renewal dates.