Want to Join the National Pension Scheme (NPS)?
By Anupama Deshpande | May 09, 2018

Suggested reading 8 Little Known Facts about Education Loan

National Pension Scheme (NPS) is a government-sponsored pension scheme. It is more beneficial for those employees who do not have any pension scheme by their employers. It was initially launched for government employees on January 1, 2004 but was opened to all sections on May 1, 2009. The main objective of NPS is to create enough corpus to enable subscriber to purchase an annuity after retirement.

Under NPS, a subscriber can contribute regularly in a pension account during his/ her working life. After retirement, he/ she can withdraw a part of the corpus in lump sum and use the remaining corpus to earn a regular income after retirement (pension). You can even defer withdrawing the lump sum amount in NPS until you are 70 years old.

Further, subscribers can claim an additional deduction of up to Rs 50,000 for contribution to NPS under section 80 CCD (1B) of Income Tax Act, over and above tax deduction of Rs 1,50,000 available under Section 80C.

Suggested reading Should You Have Card Protection Plan (CPP)?

The NPS is open to all Indian citizens whether they are residents Indians or NRIs. Following is the eligibility criteria for NPS:

1. The age of the subscriber should be between 18 years and 60 years at the time of submitting his or her application
2. The subscriber has to submit KYC documents

Suggested reading How to Pay Rent through Credit Card?

1. Subscriber Registration Form
2. Photograph
3. Proof of Identity
4. Proof of Address
5. Proof of Date of Birth

Suggested reading Why you should not stop SIP when Stock Market is down?

You need to open an NPS account with entities known as Point of Presence (POP). Most banks, both private and public sector, are enrolled as POPs. Several financial institutions also act as POPs. The authorized branch of a POP, called point of presence service provider (POP-SP), acts as the collection points. A Permanent Retirement Account Number (PRAN) is a mandatory requirement for NPS. Forms for PRAN application can be procured from any point of presence service providers (POP-SP) under NPS or can be downloaded from the website https://www.npscra.nsdl.co.in/

If you want to join NPS and open an NPS account, you need to go through following step by step process:

1. Select POP where you want to open your NPS account
2. Visit to selected POP
3. Obtain Subscriber's Registration Form (application form)
4. Fill in applicant details, bank details and scheme preference details in the application form
5. Affix your photograph and put your signature at the provided space in the form
6. Attach attested copies of Proof of Identity, Proof of Address and Proof of Date of Birth with the form
7. Attach a cheque towards NPS contribution
8. Submit the form along with all the attachments to POP-SP
9. Get the acknowledgement slip towards submission of NPS application form
10. Once the documents are verified and processed, a PRAN is generated and sent to the subscriber's correspondence address

Suggested reading 10 Things, Bank Will Ask before Providing a Business Loan

NPS offers two accounts: Tier-I and Tier-II accounts. Tier-I is a mandatory account and Tier-II is voluntary.

1. Tier I Account: Under Tier I account, you cannot withdraw money till your retirement. This account is there for the purpose of savings after the subscriber's retirement.
2. Tier II Account: Under Tier II account, you are free to withdrawal any or entire money as many times as you want. There is no lock in period under this account.

Suggested reading When Should You Choose Home Loan Balance Transfer?