National Pension Scheme (NPS) - How to register? Benefits and Rate of Returns

National Pension Scheme

The National Pension Scheme (NPS) is the pension scheme with social security initiative by the Government of India. This pension programme includes employees from public, private as well as unorganized sectors except Armed Forces. The scheme encourages people to invest in a pension account regularly during the period of their employment, After retirement, people who invested in the scheme can take out the certain percentage of the amount invested by them and the rest of the amount will be received as a monthly pension. Earlier, the NPS was only for Central Government Employees, but later, PFRDA made it open to all the citizens on the voluntary basis. NPS is more important for people working in private sectors and requires regular income after retirement.

Benefits / Advantages of National Pension Scheme

1. Rate of Return (Interest)

The NPS provides returns that are much higher than traditional tax-saving investments. This scheme has been effective for more than 14 years and has provided 8% to 10% returns so far. Also, you can change your fund manager if you are not happy with the current performance of the fund.

2. Tax Deductions

• Under Section 80CCD (1), the contribution of a tax payer towards Tier 1 investments tax deductible up to the total amount of Rs. 1.5 lakh u/s 80C.
• Under Section 80CCD-1(B), including deductions under section 80CCD(1), people invested in NPS are allowed additional deduction up to Rs. 50,000 as Tier-1 contribution.
• Under Section 80CCD(2), contribution by the employer towards Tier-1 investment is eligible for deduction up to 14% for the Contributions for Central Government and up to 10% for others.

Read more about Income Tax Deductions

3. Early Withdrawing

If you have been investing at least for 3 years, you can withdraw up to 25% for certain reasons like building or buying a house, children's wedding or higher studies, medical treatment. You can make a withdrawal up to 3 times with a gap of 5 years in the entire period. This restrictions are only applied on Tier-1 accounts, not on Tier-2 accounts.

Difference Between Tier-1 and Tier-2 account

• Tier-1 account is a default account, while Tier-2 is voluntary account.
• Tax exemption for Tier-1 account is up to 2 lakh per annum, while for Tier-2, it is 1.5 lakh for government employees and Nil for others.
• Minimum contribution for NPS in Tier-1 is Rs. 500 or Rs. 1000 per annum, while for Tier-2, it is Rs. 250 per annum.

How to register for National Pension Scheme (NPS)

People can register for National Pension Scheme through online portal eNPS. 

• Go to the official website of National Pension Scheme. Then go to eNPS portal.
• Choose one from the options : 'Individual Subscriber' and 'Corporate Subscriber'
• Choose the residential status: 'Citizen of India' or 'NRI'
• Choose account: 'Tier-1' or 'Both'. (Tier-1 is mandatory for long term savings and there is no option for Tier-2 alone).
• Enter your PAN details and select a bank or POP (Service Provider).
• Upload a scanned copy of PAN Card and Cancelled Cheque (Size: 4KB to 2MB) (Image format .jpg, .jpeg or .png)
• Upload your scanned photograph and signature in the format and size stated as above.
• Pay the required charges through net banking.
• After completion of payment, your Permanent Retirement Account Number (PRAN) will be generated.

These steps were for Indian Citizens. NRIs may need to complete additional steps.