Pension Fund Regulatory Development Authority (PFRDA) has been pursuing the development and operationalization of online transaction facilities for the prospective as well as existing subscribers of NPS (National Pension System). Towards this end, an online platform for registration of subscribers and receipt of contribution under eNPS through NPS Trust has been developed.
Through this platform, a prospective subscriber can register for NPS and contribute to his/her Permanent Retirement Account (PRAN). If you are an existing NPS subscriber and have an NPS account, you can make contributions through eNPS directly.
What is NPS?
The National Pension System Trust (NPS Trust) was established by PFRDA on 27th February, 2008. The NPS Trust has been set up and constituted for taking care of the assets and funds under the National Pension System (NPS). Individual NPS subscribers are considered as the beneficiaries of the NPS Trust.
The Government of India (GOI) rolled out the NPS for all citizens of India from May 1, 2009 and corporate sector from December, 2011.
Any individual whether employed with private sector, self employed or professional can now avail of pension benefits and plan his or her retirement by enrolling in this scheme.
The person (employee/citizen) who joins the NPS will be known as “Subscriber” in the NPS. Under the NPS, each Subscriber will open an account with Central Record keeping Agency (CRA). This account is identified through unique Permanent Retirement Account Number (PRAN).
Under NPS, two types of account are available for subscription i.e. Tier I & Tier II;
- Tier I account – where subscribers contribute his / her savings (may include employers’ contribution in case of Corporate sector) for retirement into a non- withdrawable account. However, pre-mature withdrawals are allowed before attaining 60 years only if the subscriber completes 15 years of service. The subscriber can also withdraw 50% of contribution if he/she has minimum 25 years of service.
- Tier II account – This is a voluntary savings account from which subscribers are free to withdraw their savings whenever he/she wishes. It is like a Savings Bank account. The facility of Tier II account was made available from December 01, 2009 to All Citizens of India including Govt. employees and Corporate sector. It is mandatory to have an active Tier I account for opening of a Tier II account.
Structure wise NPS account is similar to unit linked investment plan (ULIP) or unit-linked pension plan (ULPP). There will be different kind of fund options with different exposure to equity instruments , corporate debt, fixed income instruments and government securities.
The Centre made NPS scheme mandatory for all the employees who joined the service on or after January 1, 2004. It has since been adopted by most state governments also. Currently, NPS has more than 1.13 Crore subscribers with total Asset under Management (AUM) of more than Rs. 1.08 lakh crore.
How to invest in NPS online through eNPS?
Contributions to NPS scheme through online mode are possible only through CAMS or ICICIdirect. Now, with the launch of eNPS, the subscribers of NPS can invest in NPS scheme directly online. One can even register for NPS and generate PRA online.
Below is the procedure on ‘how to open, register & contribute to your NPS Account online’ through eNPS;
- Visit e NPS portal.
- Click on ‘Registration’ if you are a prospective NPS investor. If you are an existing NPS subscriber, click on ‘Contribution’ option.
- If you are registering for the first time, you have to provide details like; residential status, PAN & Account type (tier-I / tier II). You also have to select the bank in which you have a savings / current account. Your NPS account will be linked to this bank account.
- (A onetime fee of up to a maximum of Rs. 100 (plus applicable taxes) will be debited from your Bank account by the Bank as KYC authentication charges. Presently, ten banks viz. Allahabad Bank, Bank of India, Bank of Maharashtra, Oriental Bank of Commerce, South Indian Bank, State Bank of Travancore, State Bank of Hyderabad, State Bank of Patiala, Tamilnadu Mercantile Bank and United Bank of India have provided the facility of online KYC verification. PFRDA has advised all other Bank POPs to join the eNPS platform and provide online verification of KYC for the customers of their Banks willing to open NPS account online. )
- In the next screen, you have to provide – personal details, contact information, your bank account details, your photo & signature (scanned copies) & payment details.
- Your PAN number will then be validated online with the Income Tax dept. If PAN records matches with the information provided during NPS registration, you will get PAN Details confirmation message.
- You also have to choose ‘Pension Fund Manager’ & ‘investment option’ (auto / active) under ‘scheme & nomination’ menu. (ICICI, HDFC, SBI, Kotak, UTI, LIC & Reliance are the fund managers. ICICI & SBI fund managers are considered to be the best ones. For more information on ‘investment option – Active / Auto’, click here)
- An initial contribution is collected at the time of opening of new NPS account through your Debit / Credit card or Internet Banking. This contribution is a minimum of Rs 500 for Tier 1 and for Tier-II it is a minimum of Rs. 1000.
- After successful payment of initial contribution, a Permanent Retirement Account Number (PRAN) is allotted to you. The PRAN kit containing a PRAN card, IPIN/TPIN, subscribed master report, scheme information booklet along with a welcome letter will be sent to your registered address.
- The details submitted by the subscriber will be sent through CRA system to the selected Bank for KYC verification. After verification of KYC by the Bank, the PRAN will become active and operational.
- After completing your online registration, you have to take print of the pre-filled NPS online application form, paste your photograph and affix your signature. You have to send the application form to the below address within 90 days from the date of allotment of PRAN number;
Central Record keeping Agency (eNPS)
NSDL e-Governance Infrastructure Limited,
1st Floor, Times Tower,
Kamala Mills Compound, Senapati Bapat Marg,
Lower Parel, Mumbai – 400 013
If you are an existing NPS subscriber, you can click on ‘Contribution’ option on eNPS home page. You just have to provide your PRAN number & Date of birth details and get an OTP (one time password) for authentication purposes. You can then make contributions using your debit/ credit card or through internet banking.
Is NPS a good investment option for accumulating your Retirement corpus?
If it is mandatory for you to contribute to NPS then you do not have any choice but to contribute. If you want to make voluntary contributions then I believe that NPS is not a great investment avenue.
Retirement planning is a long-term goal, so when we are investing for a longer period, I prefer to invest in a simple, flexible, easy to understand, tax efficient & highly liquid investment option.
Though cost structure wise NPS is beneficial, there are certain disadvantages with NPS scheme;
- Equity exposure is capped at 50% & the retirement age is fixed as 60 years. Why should you restrict your investments in equities to just 50%?
- Terms & conditions: A lot of rules & limits are applicable for pre-mature withdrawals, withdrawals at retirement & on buying of annuity products. Buying of annuity product is a must (The quantum of investment in Annuity product depends on WHEN you choose exit from the NPS account).
- The NPS subscriber can get income tax benefits under Section 80CCD & 80CCD (1b) on the contributions, but the maturity proceeds are taxed when exiting the scheme. So, NPS falls under E-E-T category (exempt on contributions made, exempt on accumulation, taxed on maturity) (Also, the contribution to Tier-I account is only eligible for tax benefits) (Budget 2016-17 has made a proposal to make 40% of withdrawals at the time of retirement as tax-free. The remaining 60% of corpus has to be used to buy an annuity product)
Equity oriented mutual funds or ELSS funds plus PPF (Public Provident Fund) can be a better option for a long term goal like RETIREMENT. Even a simple SIP in an equity oriented balanced fund (wherein the equity exposure can be minimum 65%) can be a better choice.
If you do not have the expertise to invest in equity mutual funds, can not actively manage your investment portfolio and are happy with a defined portfolio of NPS, investing in NPS can be a better option than investing in ULIPs / ULPPs for retirement.
Talking about eNPS facility, it is expected that the subscriber will have multiple advantages like seamless on boarding experience where he/ need not visit a Point of Presence and can register from anywhere through an internet connection, contribution with minimum cost of transaction and reduction in errors resulting from various manual activities.
Latest News (17-June-2016) : Non-Resident Indians (NRIs) can now open National Pension System – NPS accounts online through eNPS portal, if they have Aadhaar Card or PAN card. NRIs can make contributions on repatriable or non-repatriable basis through their NRE/FCNR/NRO accounts. If its on a non-repatriable basis then at the time of maturity or during partial withdrawals. the funds would be deposited in their NRO accounts only. (Source : Finance ministry website)
Kindly share your views on NPS scheme? Will eNPS online facility popularize NPS scheme? Kindly share your comments.
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