National Pension Scheme: How to open NPS Account? How does this work? – CNBC TV18

The Central Government launched the National Pension Scheme (NPS) to provide individuals with income as pension to meet its retirement needs. It was launched under the Pension Fund Regulatory and Development Authority (PFRDA).

This was launched to promote your retirement income and help save tax. This allows you to plan financially safe retirement with systematic savings in a planned manner.

How to open NPS account

1. Go to the official website of NPS: https://enps.nsdl.com
   
   2. Click on ‘National Pension System’ and choose ‘Register’.
   
   3. Enter your details such as your Aadhaar card, PAN card, or decilo details.
   
   4. Click ‘Person Customer’ and select your account type: Tier 1 is mandatory for pension benefits, while Tier 2 is optional for additional savings and allows withdrawal at any time.
   
   5. An OTP for verification will be sent to your registered mobile number.
   
   6. Choose your investment preference by deciding how your NPS contribution will be invested. Auto mode investment is done automatically based on your age, while in active mode, your investment is controlled.
   
   7. Once all the formalities are made, upload your documents and pay. The minimum contribution to Tier 1 per year is ₹ 500 and ₹ 1,000 for Tier 2.
   8. Once the payment is successful, you get a permanent retirement account number (soul).

How does NPS account work?

NPS account holders can make regular contribution to their pension account during their employment period.

After investing up to retirement, they can withdraw a portion of about 60%, and put them for good use. The remaining, ideally should be used to provide 40%of the entire funds invested, to buy an annuity and provide a basis for a stable income after retirement.

In the unfortunate circumstances of the death of the account holder before 60 years, the entire money is to be paid to the legal heir of the nominee or account holder.

NPS provides significant tax benefits to encourage long -term retirement savings. Under Section 80 CCD (1), you can claim tax deduction of up to ₹ 1.5 lakh on your contribution, which is included in the overall range of Section 80C.

Additionally, Section 80CCD (1B) allows an additional cut of ₹ 50,000, the total possible cuts take up to ₹ 2 lakh per year.

If your employer contributes to your NP, Section 80 CCD (2) gives them exemption from taxes (up to 10% of your salary for private employees and 14% for government employees).

Finally, when you retire, 60% of your NPS corpus is tax-free, the remaining 40% is used for pension (taxable based on your income).