How to open a NPS account

NPS is a voluntary pension scheme regulated by PFRDA and backed by Central Government of India; under this scheme any individual from 18 to 60 years of age can build a retirement corpus in a systematic manner. Post retirement an individual can withdraw up to 60% of the corpus as lump sum and balance 40% as monthly pension from PFRDA registered life insurance companies.

What are the highlights of NPS?

  1. An Individual can save tax up to Rs. 2 lakhs in a year (1.5 lakh in 80C and 50,000 in 80CCD)
  2. Individual can choose to invest in equity and debt instruments according to his own risk appetite. The maximum investment allowed in equity is 50%
  3. Minimum contribution for NPS is INR 500 per month or INR 6,000 per year
  4. Citizens of India or NRI (with valid Indian passport) can open the NPS account from anywhere in India
  5. First point of contact for the subscribers to open a NPS account are POP (Point of presence), the list of POP can be found in www.pfrda.org.in
  6. Flexibility to choose fund managers from 8 Asset management companies
  7. Fund Management cost is lowest among all investment options in India
  8. PFRDA has established NPS trust to monitor and review the performance of Fund Managers

Also read: Simple steps to open NPS account online using e-NPS

How to open a NPS account online in HDFC?

  1. HDFC securities registered users can login with their trading id and password
  2. New users can create a new HDFC account to access the website 
  3. Under “Online NPS” – Enter the personal details, nomination and bank details
  4. Print this form with supporting documents like address and ID proof with 2 recent photographs and submit to the nearest HDFC securities branch.
  5. A investors is required to make Rs 500 at the time of applying.

Once the KYC is done, Permanent Retirement Account (PRA) is created and “Unique Permanent Retirement Account Number (PRAN)” will allotted to each subscriber. An individual can open only one PRAN account.

Also read: NPS account for NRIs in India

What are the two investment types in NPS account?

Tier I Account: Tier I account is a mandatory pension scheme. One can withdraw the amount only after the subscriber attains the age 60.

Tier II Account: Tier II is an optional account, this account can be opened only with Tier I or after Tier I account opened. In this option the subscribers can withdraw the money anytime, this option does not eligible for tax saving. In Tier II Account the minimum holding in a year is Rs 2,000.

See also: NPS withdrawal process and procedures with different types of withdrawal forms

What are the two investment choices in NPS account?

Active Choice: Under this option, investors are free to allocate the investment across a) Asset Class E (Equity investment but equity restricted to maximum of 50%); b) Asset Class C (debt instrument excluding govt. securities); c) Asset Class G (only govt. securities).

Auto Choice: Under this option, funds invested across three asset classes based on the age of the investors. For example, Age between 18-36 the investments will be allotted as 50% in Asset Class E, 30% in Asset Class C and 20% in Asset Class G.

 

If you have any doubts regarding opening NPS account, kindly leave a comment. We would try our level best to address those.

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