Retirement planning is a long process that helps you grow wealth over the long years to secure your golden years of life. National Pension Scheme or NPS is one of the most popular investment tools for retirement planning in India. NPS is a long-term investment product launched by the Government of India with many amazing features and tax benefits. Before you invest in any option, it would be better to know more about the investment option and ways to invest in it.
Understanding NPS (National Pension Scheme)
The National pension scheme is a defined contribution pension plan managed by the Pension Fund Regulatory and Development Authority (PFRDA). Here are certain key points to keep in mind while investing in the National Pension Scheme.
The minimum age limit for investment into NPS is 18 years. NPS account holders can continue to make annual contributions to 65 years of age. Every citizen of India is eligible to make an investment into the scheme.
NPS comes with two accounts Tier I and Tier II pension accounts. Tier I is compulsory to open an NPS account and Tier II is an optional account which allows you to park additional funds temporarily in the scheme. The investment can start with INR 500 for one time and a minimum of INR 1,000 per annum in Tier I account.
Safe and convenient
As the scheme is introduced by the Government of India and regulated by government body Regulatory and Development Authority (PFRDA), investing in NPS is considered to be the safe option. It also allows you to conveniently operate your account from anywhere in India through their huge network of point of presence (POPs). You can also invest in NPS online.
NPS investment plans allow you to choose between two different investment choices – active option and auto option. In case of an active option, you can actively build your NPS portfolio with your desired asset allocation choices by choosing different compositions of equity, bonds and government securities. In the case of an auto option, the fund manager will create your portfolio based on his expertise.
On maturity, NPS investment plans allow you to withdraw up to 60% of the corpus and 40% needs to be compulsory to be annuitized. There are many annuity options available which can be chosen by the investor depending on the requirement and preference. Investors can also wait for up to three years to withdraw the corpus depending on the market condition.
Contribution to the National Pension Scheme can be claimed for tax deduction under Section 80C of the Income Tax Act, 1961 of up to INR 1, 50,000. Additional tax benefit of up to INR 50,000 can be claimed under section 80CCD of the IT Act.
NPS investment plans are the most tax-efficient, flexible and cost-effective investment options available for retirement planning. To invest in NPS online, you need to follow a simple process
How to Invest in NPS online?
To invest in NPS online, you need to keep certain documents ready with you. Following are the documents required for opening an NPS account online.
- PAN card is mandatory and should be linked to a bank account
- Aadhaar card with current address and mobile number updated
- Bank account with a net banking facility
- Scanned image of your signature
- Passport size photograph
Following is the step by step process that needs to be followed to invest in NPS online –
- Log on to National Pension Scheme Trust website
- Click on ‘National Pension System’ tab
- Click on ‘Registration’, an online registration page will open
- Fill in all the appropriate details such as applicant type, status, KYC details, account type, mobile number, and aadhaar number. Upload aadhaar offline e-KYC file if you have and continue.
- For aadhaar based KYC, authenticate it by entering the OTP (one time password) received on your aadhaar registered mobile number. For PAN-based KYC, linked banks will verify your details with minimal charges levied.
- Fill in all your personal details, investment choice, and fund manager, nomination along with uploading your photograph and signature
- Make a contribution through online payment and get your PRAN allotted
- If you cannot sign digitally, you can download the form, paste your photograph, sign the form and mail them to the CRA office within 90 days.
Investing in NPS investment plans is quite simple which helps you build a good amount of corpus for your golden years of life.