Back to Blog
Retirement planning is one of the key factors that new-age investors look for. They look for multiple options, such as FDs, PPFs, or investing in any kind of retirement plan. But here, one name also comes into the picture: the National Pension System. How can you open an NPS account? What is NPS, and what are its advantages? We’ll discover in this blog.
National Pension System – An Introduction
The National Pension System is a voluntary retirement savings scheme backed by the Government of India. It allows individuals to contribute regularly during their working years. NPS invests in a mix of asset classes, such as equities, corporate bonds, government securities, and AIFs. NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), making it a secure and long-term investment option.
Opening an NPS account can be a smart step towards a financially stable retirement. Let’s have a look at the types of NPS accounts.
Types of NPS Accounts
Before opening an NPS account online or offline, it is crucial to know the types of NPS accounts available:
Tier I: This is the primary retirement account. Contributions in this account are locked in until the account holder reaches the age of 60, subject to specific withdrawal rules. It offers tax benefits under Section 80(C) of up to ₹1.5 lakh. There is an additional tax benefit of ₹50,000 under Section 80 CCD (1B), which is over and above Section 80 (C).
Tier II: A voluntary savings account with no lock-in period. It does not offer the same tax benefits, but it allows for flexible withdrawals.
The National Pension System: Advantages
1. Regulated: The National Pension System is regulated by PFRDA (Pension Fund Regulatory and Development Authority), which maintains transparency and protects the subscribers’ interests.
2. Potential for High Returns: NPS investments are market-linked, as they invest in equities, which increases the potential for high returns.
3. Diversification: NPS invests in equities, corporate bonds, government securities, and AIFs. It provides the necessary diversification that an investment should have.
4. Professional Management: NPS investments are managed by professional fund managers. They have the expertise to create a balance between risk and return.
5. Portable: A subscriber’s change in job or location doesn’t impact his or her contributions. Subscribers can continue to invest in NPS without worrying about employment changes.
6. Tax Benefits: This is one of the major advantages of NPS. It provides tax benefits under Section 80(C) and 80CCD 1(B), respectively.
7. Low Investment Retirement Plan: Any Indian citizen can open an NPS account online with a minimum contribution of ₹500.
Click here to learn how the NPS calculator can help you in retirement planning.
How to open an NPS account online?
Any Indian citizen aged between 18 and 70 can open an NPS account online by following these 5 simple steps:
Step 1: Visit a trusted eNPS portal: Access a reliable eNPS portal through your laptop or mobile device.
Step 2: Complete registration: Sign up as a new ‘Subscriber’ by entering your PAN, Aadhaar number, and other required details.
Step 3: Obtain your PRAN: Upon successful registration, you’ll receive a Permanent Retirement Account Number (PRAN) to access your account online.
Step 4: Make your first contribution: Once your account is activated, you can begin contributing to your NPS.
Step 5: Set your asset allocation: Allocate your investments, select your preferred fund manager, and choose between active or auto investment modes.
Monitor your investments regularly and make adjustments based on your financial goals, risk appetite, and investment horizon.
Final Thoughts
The National Pension System is one of India’s most attractive retirement plans, offering benefits such as market-linked returns, tax savings, portability, and flexibility. Any eligible Indian citizen can open an account and start building a secure retirement fund by following these straightforward steps.
