NPS (National Pension Scheme): Benefits, Eligibility & Registration

author portrait

Hiral Vakil

NPS
Pension Income
Section 80CCD

NPS is an easily accessible, low cost, tax-efficient, flexible and portable retirement savings account. Pension plans provide financial security and stability during old age when people don’t have a regular source of income. For the purpose of providing social security/welfare to the individual, the employer can also co-contribute to the retirement account along with an individual under this scheme. Retirement plan ensures that people live with dignity and without compromising on their standard of living during later years in life.

Pension scheme gives an opportunity to invest and accumulate savings and get lump sum amount as regular income through annuity plan on retirement. The objective of this scheme is:

Want to know what other tax deductions you can claim?
Read our article to understand the different types of tax deductions available to you and how to avail them.
Read More
Want to know what other tax deductions you can claim?
Read our article to understand the different types of tax deductions available to you and how to avail them.
Read More

Features of NPS (National Pension Scheme): 

When you join NPS, you’ll be allotted a Permanent Retirement Account Number- PRAN; a 12-digit unique ID number. In case you misplace your PRAN card or it gets stolen, it can be reprinted with additional charges. This unique PRAN can be used from any location in India.

Two sub-accounts namely Tier I and Tier II are provided under NPS account:

Higher the amount of contributions made, the greater the investments achieved, the more the time period over which the fund accumulates and the lower the charges deducted, the more the benefit of the accumulated pension wealth over time.

Who can invest in NPS?

How to open an NPS account? 

An Individual can open an NPS account in two different ways: Online and Offline

The steps for online registration are:

  1. Go to eNPS website and select new registration

    Choose Aadhaar or PAN as an option to perform KYC verification section

  2. Enter Aadhaar / PAN details

    Enter the OTP to start the registration process

  3. Fill up all the mandatory details

    Including uploading your digital photograph and scanned signature

  4. Make a payment towards NPS account

    You can do this using your Debit/Credit Card or Internet Banking

  5. If you started the registration process via Aadhaar

    you can eSign your application and complete the registration process. No need to send the physical copy of a form to CR

  6. In case you chose PAN

    you need to select ‘Print & Courier’ option, take the print out of the filled form, affix your photograph and send it to NSDL e-Governance Infrastructure Limited. 

Alternatively, you can do this offline by Physical submission of Form and KYC documents

  1. Download Permanent Retirement Account Number (PRAN) Application Form
  2. Fill in the mandatory details, affix the photograph and signature & scheme preference details
  3. Submit the Application form along with your address proof and ID proof to your nearest POP-SP
  4. Upon submission, POP-SP shall give you receipt number which you can use to track your PRAN Application Status

You are required to make the first contribution at the time of applying for registration to any POP-SP. For this, you have to submit NCIS (Instruction Slip) mentioning the payment details.

Ask an Expert (Income Tax)
Talk to an expert via call, whatsapp or messages. Ask questions about tax returns, applicability & compliance etc.
[Rated 4.8 stars by customers like you]
Ask an Expert (Income Tax)
Talk to an expert via call, whatsapp or messages. Ask questions about tax returns, applicability & compliance etc.
[Rated 4.8 stars by customers like you]

What documents are required for opening an NPS account?

The following documents are needed for the opening of an NPS account:

What are the tax benefits of NPS? 

Section Provision Tax Benefits
Section 80CCD(1) Employee’s Contribution The deductions under this section are available on the amount the individual contributes to his NPS account. Whichever from the following is less, it is exempted from taxes10% of the employee’s salary(If the individual is self-employed, 10% of the gross income)Rs. 1,50,000*
Section 80CCD(2) Employer’s Contribution If the employer also contributes to an individual’s NPS, the amount won’t have any ceiling limit, provided the contribution doesn’t exceed 10% of the salary.
Section 80CCD(1B) New Pension Scheme This is a new section, introduced in 2015, that will provide an additional deduction of up to Rs 50,000 on the amount contributed to NPS.

The tax benefits are available only in the case of Tier I account; not in Tier II account.

Want to know what 80C covers?
Read our article here to see all the deductions you can claim under this section and reduce your tax liability.
Read More
Want to know what 80C covers?
Read our article here to see all the deductions you can claim under this section and reduce your tax liability.
Read More

FAQs 

Is contribution to NPS mandatory for salaried employees?

No. Unlike contribution to Employee Provident Fund, contribution to NPS is completely voluntary. It is up to an individual whether he wants to invest in NPS or not. Even self-employed person can open an NPS account and make voluntary investments into the account.

What is the difference between Tier I and Tier II account

In tier I account, no withdrawals are allowed until the subscriber reaches 60 years of age while in Tier II, the subscriber can withdraw from his balance anytime he wants.

What are the investments limits in NPS? 

Following are the limits of contribution to NPS:
– In Tier I account, minimum Rs. 6000 has to be deposited in a year (minimum contribution is Rs. 500 at one time)
– In Tier II account, minimum Rs. 2000 has to be deposited in a year (minimum contribution is Rs. 250 at one time)
There is no upper limit of investment

Can I appoint a nominee for NPS account? 

Yes, you need to appoint a nominee at the time of opening of NPS account. You can appoint up to 3 nominees for your NPS Tier I and Tier II accounts. In case of more than one nominee, you need to specify the percentage of your savings that you wish to allocate to each nominee. Total share percentage across all nominees should aggregate to 100%

Close Bitnami banner
Bitnami