NPS investment FAQ: Steps to open, tax benefits, expected returns and more

Yes, you can.

Any Indian citizen between the ages of 18 and 65 can open an NPS account.

You can apply for an NPS account by visiting a Point of Presence (PoP) or through the e-NPS website.

You'll need a Permanent Account Number (PAN) and other KYC details for registration.

Yes, an NRI can open an NPS account.

Contributions made by NRI are subject to regulatory requirements as prescribed by RBI and FEMA from time to time.

If the subscriber's citizenship status changes, his/ her NPS account will be closed.

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There is no limit to investing under NPS in the two types of accounts — the pension account (tier-I) and the investment account (tier-II).

If the individual falls under a tax bracket, they may consider pooling regular contributions under the NPS to avail tax benefits, even if they fall under the old or new tax regime.

Furthermore, investment can also be done with the specific purpose of building a retirement corpus along with wealth creation.

A subscriber is required to make an initial contribution in NPS, where a minimum of Rs 500 is required for tier-I and a minimum of Rs 1,000 for tier-II at the time of registration.

NPS provides tax deductions under Section 80C of the Income Tax Act, allowing individuals to claim up to 10% of their gross income within the overall ceiling of Rs 1.5 lakh.

An additional deduction of Rs 50,000 is available exclusively to NPS subscribers under Section 80CCD (1B), making the total deduction allowed with NPS up to Rs 2 lakh.

Yes, additional tax benefits are available for corporate sector employees.

Employer's NPS contributions, up to 10% of salary, are deductible from taxable income without any monetary limit.

This contribution can also be treated as a 'business expense' in corporate accounts.

You can do this by following these steps: Visit the eNPS website- enps.nsdl.com/eNPS/NationalPensionSystem.html - to register online.

The mobile number, Aadhaar, and Permanent Account Number (PAN) must be linked with the NPS account.

To complete the validation, an OTP will be sent to the registered mobile number.

Upon completion of registration, the subscriber will receive a Permanent Retirement Account Number (PRAN), which can be used to log in to the NPS account.

After PRAN is allotted, you have to select the 'eSign' option.

OTP for the purpose of authentication will be sent to the mobile number registered with the Aadhaar.

After authentication of Aadhaar, the registration form will be successfully eSigned.

Once a document is eSigned, you are not required to send the physical copy of the form to Central Recordkeeping Agency (CRA).

Existing subscribers can approach Point of Presence - Service Providers (POP-SP) or visit the e-NPS website to make additional contributions to their Tier 1 account.

KYC verification is required during the registration process.

A thumb rule is to save around 20-30% of your income for retirement, as per experts.

The exact amount depends on factors like age, risk appetite, retirement corpus goals, and expected return on investments.

NPS returns depend on factors like pension fund managers (PFMs), asset allocation, investment options, and risk appetite.

Historically, NPS has provided returns in the range of 9-12% under the tier-I equity asset class.

It must be, however, understood that the return under NPS is market-driven.

Hence, there is no guaranteed/defined amount of return.

The returns generated through investments are accumulated and is not distributed as dividend or bonus.

Yes, you can.

A Tier 1 account allows the subscriber to make a premature withdrawal or even exit under certain conditions.

In case the total accumulated corpus in a Tier 1 account is less than Rs 2 lakh, the subscriber can opt for a 100% lump sum withdrawal upon attaining 60 years of age.

A Tier II account, meanwhile, offers greater flexibility in terms of withdrawal, as it enables the subscriber to withdraw funds at any time without any restrictions.

A subscriber cannot, however, withdraw money from the NPS before the completion of three years.

The subscribers can make a partial withdrawal a maximum of three times during the entire tenure of subscription under NPS.

The partial withdrawal request can be initiated online by the subscriber.

Alternatively, a subscriber can submit a physical partial withdrawal form along with documents.

NPS is a tightly regulated financial product, managed professionally and transparently.

It is considered safe for investment, and pension funds are regulated by the Pension Fund Regulatory and Development Authority (PFRDA).

NPS can certainly assist in building a retirement corpus due to its tax benefits, flexible contributions, low costs, and safety.

However, diversification in investments is often recommended for a well-rounded retirement plan.