National Pension System (NPS)

National Pension System (NPS) is a government-backed retirement savings scheme designed to help you build a secure future. In this plan, you can contribute regularly during your working years, and your money is invested in a mix of equity, corporate bonds and government securities.

With time, your savings grow with market returns. At retirement, you can withdraw a part of your corpus as a lumpsum (60%) and use the rest (40%) to buy an annuity for a steady monthly pension. NPS ensures long-term financial security and peace of mind after you retire.  

The National Pension System (NPS) offers a range of benefits and features that make it a top choice for retirement planning:

• Regulated: Managed under the PFRDA (Pension Fund Regulatory and Development Authority), the NPS is governed by transparent guidelines and regular monitoring by the NPS Trust.

• Voluntary participation: Available or open to all Indian residents, citizens between 0 to 85, the NPS scheme provides flexibility in investment amounts and timing according to their financial goals and risk tolerance.

• Flexibility: Choose or change your Point of Presence (POP), investment pattern and fund manager to optimise returns.

• Cost-effective: Offering one of the lowest fees among other investment options, the NPS ensures economical long-term savings.

• Portability: Your National Pension System Account and PRAN remain unchanged, even with job changes or relocations.

• Superannuation Fund Transfer: Allows tax-free transfer of superannuation funds to your NPS pension system account, subject to approvals.

• Tax Advantages: Triple tax benefits under Sections 80C, 80CCD(1B) and 80CCD(2)

If you are looking for NPS account opening online eligibility conditions, read these criteria below:

• You must be an Indian citizen (resident, non-resident, or OCI)

• Your age must be between 0 and 85 years at the time of NPS application.

• You must comply with all KYC requirements by submitting documents on the subscriber registration form.

• NPS is an individual Pension Account and cannot be opened on behalf of others; Hindu Undivided Families (HUF) and Persons of Indian Origin are not eligible.

For NPS account opening, the Tier 1 account requires a minimum contribution of ₹250, while the Tier 2 account requires ₹1,000.

The National Pension System (NPS) offers two types of accounts: Tier 1 (mandatory) and Tier 2 (voluntary). A Tier II account requires a Tier I account and differs in tax benefits and withdrawal rules.

• Tier 1 Account: Employees can contribute up to 14% of their base pay plus DA, with a minimum of ₹250 at the time of account opening and min of ₹10 on subsequent contributions

• Tier 2 Account: Does not offer tax breaks or matching contributions but allows flexible withdrawals anytime. Opening an NPS Tier II account requires an initial payment of ₹1,000 and subsequent top-ups of Rs. 250, maintaining a yearly balance over ₹2,000.

Here are some important limits and guidelines for investing in an NPS Account:

Tier I Account (Mandatory) – It is a mandatory NPS account that you can open with ₹500. You need to invest at least ₹1,000 yearly with a lock-in period of 60 years and get tax benefits up to ₹2 lakh under Section 80C and 80CCD(1B) under old tax regime. Also employer contribution provides tax benefits up to 10% of base pay plus DA under old tax regime, and 14% of base pay plus DA under new tax regime.

Tier II Account (Optional) – The account is optional. You can open with an NPS payment of ₹1,000, there is no lock-in and no tax benefits. It mostly works like a Savings Account.

Minimum Contribution – The minimum contribution is ₹250 for Tier I and ₹250 for Tier II per transaction.

No upper limit– There is no upper limit and you can invest any amount for better retirement savings.

The NPS tax benefit makes it an attractive choice for both salaried and self-employed individuals who wish to grow their retirement savings. Here’s how -

Tax benefits for salaried employees

• Section 80CCD(1) - You can avail yourself of a tax deduction of a maximum of 10% of your salary and an allowance subject to a limit of ₹1.5 lakh.

• Section 80CCD(1B) - In addition to that benefit is a deduction of ₹50,000 on top of the ₹1,50,000 limit in Section 80CCDB (I).

• Section 80CCD(2) - In case your employer makes contributions to your NPS Account also qualifies for a deduction beyond the limit of ₹1.5 lakh.

Tax benefits for self-employed individuals

• Section 80CCD(1B) - You can claim up to ₹50,000 plus 20% of your gross income as a deduction, up to a ₹1.5 lakh limit.

• Section 80CCD(2) - Any contributions you or your employer made to NPS also qualify for deductions.

Additional perks

NPS enables you to access a tax withdrawal of up to 60% of your retirement funds and enjoy savings benefits while offering flexible contribution options suitable for both employees and self employed individuals alike. Additionally providing advantages such as management fees for funds and the ability to transfer accounts easily along with exposure to equities for returns and the option for partial withdrawals, in case of emergencies ensures a stable financial future during retirement.

• Login to ICICI Bank Net Banking> Investments and Insurance> National Pension System

• Click on Make Contribution and fill all the mandatory details.

• Preview the details filled and click on ‘Submit’ to register the biller and fund the NPS
  Account.

Note: First contribution towards National Pension System (NPS) needs to be made online within 45 days of PRAN generation or the Account will be frozen.

When planning your investments with the NPS scheme, you can choose between:

Active Choice:

• Offers the freedom to customise your portfolio across four asset classes: Equity (E), Corporate Bonds (C), Government Securities (G), and Alternate Assets (A).

• Ideal for those investors confident about market movements, managing risk and willing to assume the responsibility of balancing their portfolios.

• You decide how much to allocate to each class based on risk tolerance and potential return: Equity (E) offers high returns with high risk, Government Securities (G) are low risk and Alternate Assets (A) are highly volatile with a 5% cap.

Auto choice (Life cycle fund):

• Suitable for those hesitant or unfamiliar with actively designing their portfolios.

• Allocation adjusts automatically based on age: higher equity exposure in younger years, reducing as you age to lower risk.

• Four options are available: LC 75 (75% maximum equity exposure), LC 50 (moderate exposure), LC 25 (conservative exposure) and BLC (Balanced Life Cycle – which has a more balanced exposure to equity till the age of 45 years of age)

 To manage your National Pension System account online, you need to complete the NPS login process using your PRAN and password. Here's how you can log in easily through the NSDL NPS portal.

Steps:

Visit:NSDL NPS Portal

Click "Login with PRAN or IPIN"

Enter PRAN and password

For First-Time Login:

Reset password > Enter details > OTP verification > Login