Have you decided to open an NPS account for planning your retirement funds?
Read ahead to know NPS in detail and find answers to concerns such as ‘NPS account meaning’ and ‘how to open NPS account’.
Before you open an account and commit to a retirement fund, it is important to know about it in detail. So if you have been searching for ‘what is NPS account’ or ‘NPS account meaning’, you are in the right place.
NPS stands for National Pension System and it is a voluntary retirement fund available to all Indian citizens, regardless of their mode of employment. It was made available to every citizen on the 1st May, 2009 and is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
Now that we know NPS account meaning, here are some more details -
You can start an NPS account if you are a salaried individual or self employed, and between the age of 18 and 70.
This system is completely voluntary for individuals and the amount of money saved also depends on the individual.
Once you open an account, the Central Recordkeeping Agency (CRA) for the NPS will allot you a unique Permanent Retirement Account Number or a PRAN.
The initial minimum contribution to be made is Rs.500 for Tier-I and Rs.1,000 for Tier-II accounts.
There are two types of accounts under the NPS, the major differences between which are outlined in the table below -
Tier-I NPS Account
Tier-II NPS Account
The minimum initial contribution to be made is Rs.500
The minimum initial contribution to be made is Rs.1,000
Contributions should be made at least once a year
No such rule
Each contribution should be minimum Rs.500
Each contribution should be minimum Rs.250
The minimum contribution at the end of each financial year should be Rs.1,000
No minimum balance needs to be maintained
There are two ways to open an NPS account -
Let us take a look at them one by one.
There are Point of Presence - Service Providers (POP-SP) all over the country. For the offline method, you need to visit your nearest POP-SP. Here are the steps you need to follow -
STEP 1: Locate your nearest POP-SP and procure the PRAN application form from there.
STEP 2: Alternatively, you can download the form from the website and visit once you have it filled.
STEP 3: When you want to open your account, visit with the filled PRAN application form, KYC documents, and all other required documents (if any) and submit it.
STEP 4: You will need to make your first contribution at the time of registration. You can do this by submitting an instruction slip that mentions the details of the payment made towards your PRAN account.
STEP 5: You will be given a receipt number which you must keep carefully for tracking the status of your application.
STEP 6: You will get your PRAN card at the address that you have provided.
Follow these steps to open an NPS account from the comfort of your home -
STEP 1: Visit the eNPS portal here and click on ‘National Pension System’.
STEP 2: On the pop-up that opens up, choose the ‘Registration’ option.
STEP 3: The ‘Online Subscriber Registration Page’ will open up. By default, the ‘New Registration’ option will be selected, but you can choose to continue with your pending registration or eSign or Authenticate your OTP, etc.
STEP 4: Fill up the form according to your details, and finally click on ‘Generate OTP’.
STEP 5: The OTP will be sent to your mobile number, and once you validate that, you will receive your PRAN which you can use to log in to your NPS account. You can choose UPI for your initial payment as well.
After your PRAN has been allotted, there are two options to proceed -
STEP 1: Select the ‘eSign’ option from the ‘eSign / Print & Courier’ page.
STEP 2: You will receive the OTP for authentication on your mobile number that is registered with Aadhaar.
STEP 3: Once your Aadhaar is authenticated, your registration form will be successfully eSigned. Once the eSign is successful, you would not need to send the physical copy of the form to the CRA.
STEP 4: You will have to pay the eSign service charges, applicable taxes, as well as the UIDAI charge.
OPTION-2: Print and Courier
STEP 1: Select the ‘Print & Courier’ option from the ‘eSign / Print & Courier’ page.
STEP 2: Take a printout of the form and paste your photograph. Do not staple or clip your photograph to the form.
STEP 3: Sign on the block provided for signature. Please do not sign across your photograph. STEP-4: The form should be sent within 30 days from the date of allotment of PRAN to CRA at the following address or else the PRAN will be ‘frozen’ temporarily -
Central Recordkeeping Agency (eNPS)
NSDL e-Governance Infrastructure Limited
1st Floor, Times Tower, Kamala Mills Compound, Senapati Bapat Marg
Lower Parel, Mumbai - 400 013
There are many benefits of opening an NPS account.
Some of them are listed here -
It helps you build a fund for your old age, and lets you enjoy your life post retirement.
The contributions are voluntary, you can contribute any time and any amount.
Opening an NPS account is simple and hassle-free.
You can choose your investment options based on your risk appetite.
It is regulated and monitored closely, which makes it a safe investment option.
You can operate and access your account from anywhere within the country.
Even NRIs can plan their retirement under this scheme.
Each and every long term investment plan comes with some set rules and regulations of withdrawal. Here are the rules of withdrawing your funds from the NPS account -
You can partially withdraw money only after 3 years of opening the NPS account.
You can withdraw money only 3 times during the whole tenure.
The part withdrawals cannot be more than 25% of your contributions.
All money withdrawn from the NPS account will be tax exempted.
You can withdraw 60% of the money when you reach the age of 60, and the remaining balance needs to be utilized to purchase an annuity.
At the age of 60, if the corpus amount is Rs.5 Lakh or less, you can withdraw the total amount.
If you want to withdraw before reaching the age of 60, you need to utilize at least 80% of the accumulated fund to purchase an annuity.
Before the age of 60, total withdrawal in any case can be done only after 5 years of starting the account.
You can withdraw 100% of the funds if they are Rs.2.5 Lakh or below, and you have not turned 60 years of age.
The legal heirs or nominees can withdraw 100% of the corpus amount in case the subscriber is deceased. They can even opt out of purchasing annuity
NPS is a voluntary and versatile way of saving funds for your retirement. You can open your NPS account from most banks, or POP-SPs, or even online. The process is very easy and can be done within minutes.
You can withdraw a percentage of your funds up to 3 times during your tenure, but you cannot take a loan on your NPS account. The money will be useful for you post the age of 60, but you can also exit from the scheme after 5 years of opening the account.
But if you are in need of some urgent funds, you can easily opt for moneyview loans. You can check your eligibility in just 2 minutes by visiting our website or downloading the moneyview app.
No, a subscriber can open only one NPS account.
No, you cannot open an NPS account jointly with your spouse or children. It also cannot be operated or opened for a Hindu Undivided Family, it has to be opened in individual capacity.
Tax benefits are not available in case of withdrawal from or investment in the Tier-II NPS account.
If you are registering from a POP-SP, it will take a minimum of 10 working days for your registration to be completed. In case you opt for online registration, the process will be completed within a few minutes.
NPS offers two investmentment choices while opening your account, active and auto. Under auto choice, the choice is made for the subscriber in a pre-defined manner based on the subscriber’s age. In case of active choice, the subscriber can choose by themselves.
Yes, NRIs can also open NPS accounts, but they can only opt for Tier-I accounts. NRIs cannot open Tier-II accounts.
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