How to Invest in the National Pension Scheme in 2024

In this article, we will discuss

• What is the National Pension Scheme (NPS) and How Does it Work?
• Eligibility Criteria for Investing in NPS
• Documents Required for Investing in NPS
• How to Invest in NPS Online?
• How to Invest in NPS Offline?
• Conclusion

Securing a comfortable and stable post-retirement life is one of the most important financial goals for many investors. The National Pension Scheme is among the different ways to create long-term wealth and ensure a steady stream of income after retirement. NPS offers a unique combination of security, flexibility, tax benefits, and market-linked returns, making it an attractive option for individuals looking to build a large retirement corpus.

Samco Securities offers a powerful yet user-friendly NPS calculator designed to help investors quickly estimate the returns they are likely to receive from their investment in the scheme. Based on the estimated returns, investors can determine whether the National Pension Scheme is the ideal investment option for them or if they should look out for other potentially more lucrative investment opportunities.

In this comprehensive guide, the focus is going to be primarily on how to invest in the NPS scheme through the online and offline modes. Additionally, the guide will also cover the eligibility criteria that investors must meet to invest in the scheme and the documents they need to submit as part of the application process.

What is the National Pension Scheme (NPS) and How Does it Work?

The National Pension Scheme, or NPS, is a voluntary contribution scheme designed to provide regular income to investors after they retire. It is a government-backed investment scheme that was first launched in 2004 for government employees and was later expanded to all Indian citizens in 2009.

The NPS system is simple and easy to understand. Here is a quick overview of how the investment option works.

Investors who open an NPS account contribute to it regularly all through their working years. The contributions they make are invested in professionally managed funds of the investors’ choice. The NPS system offers different fund schemes that invest across multiple asset classes, such as equity, corporate bonds, government securities, and alternative investment funds.

Investors can continue to invest in the NPS scheme until they reach 60 years of age. At this point, they may choose to exit from the scheme. Out of the total accumulated corpus (including the returns), investors may choose to withdraw up to 60% of it as a lump-sum amount. The remaining 40% is then used to purchase an annuity plan that provides a regular pension.

The National Pension Scheme’s benefits extend beyond helping investors create a retirement corpus and establish a steady source of passive income. The scheme also provides tax benefits, where the investors can claim the investment they make towards an NPS account as a deduction from their total income. The maximum amount of deduction is limited to Rs. 1.5 lakh per financial year as per section 80C of the Income Tax Act. In addition to this, investors may also avail of another additional deduction of up to Rs. 50,000 under section 80CCD(1B) as well.

Eligibility Criteria for Investing in NPS

Now that you are aware of the National Pension Scheme and how it works, let us quickly look at the eligibility criteria that investors need to satisfy to be able to invest in the scheme.

• The applicant must be a resident of India, a non-resident Indian (NRI), or an Overseas Citizen of India (OCI).
• The applicant must be between 18 and 70 years of age as of the date of submission of the NPS account opening application.
• The applicant must comply with the Know Your Customer (KYC) norms as listed on the Subscriber Registration Form (SRF).

Note: Persons of Indian Origin (PIOs) and Hindu Undivided Families (HUFs) are not eligible to invest in the NPS scheme. Furthermore, an NPS account cannot be opened on behalf of another person.

Documents Required for Investing in NPS

As part of the application process, investors are required to submit a few documents to open a National Pension Scheme account. Here is a quick overview of some of the documents that may need to be submitted.

• A copy of the PAN card
• A copy of the Aadhaar card or any other valid address proof
• A copy of the latest passport-sized photograph
• A copy of the passport (for NRI applicants)
• A cancelled cheque leaf

How to Invest in NPS Online?

Opting for the online account opening process is the easiest and fastest way to invest in the NPS scheme. The Pension Fund Regulatory and Development Authority (PFRDA) is the entity responsible for maintaining and managing the investment scheme. The PFRDA has appointed three central record-keeping agencies, also known as CRAs, to help administer the opening of NPS accounts. The three CRAs include Protean e-Gov Technologies Limited (formerly NSDL), Computer Age Management Services (CAMS), and KFintech.

If you are planning to open an account, you can do so through any of the above-mentioned CRAs of your choice. However, remember that the process may vary slightly depending on the entity that you choose. Now, let us look at the step-by-step process you need to follow to open an NPS account.

• Step 1: Visit the website of your preferred central record-keeping agency (CRA).
• Step 2: Click on the ‘Join NPS’ link or the ‘Register Now’ link to proceed with the application process.
• Step 3: Once you are redirected to a new webpage, you need to enter a few personal details. These include your name (as per your PAN card), PAN, date of birth, email ID, and mobile number. Enter the details and proceed.
• Step 4: A one-time password (OTP) will be sent to the mobile number you submitted. Enter the OTP in the field and click on the ‘Verify OTP’ link to proceed.
• Step 5: If your details are already on the CKYC registry, you can choose to use the same for the NPS account opening process. This will help you save a lot of time and effort. However, if your details are not available on the CKYC registry, you can choose to register via the online Aadhaar option, where your personal details will be downloaded from the UIDAI website.
• Step 6: Complete the rest of the NPS account opening application form. You will be required to enter a few more personal details, upload scanned copies of documents, select the type of account you wish to open, enter details of your bank account, enter nominee details, select the pension fund you wish to invest in, provide a FATCA declaration, and enter the initial amount you wish to invest in.
• Step 7: Before you submit the application online, remember to check the details once to ensure there are no errors or mistakes. Once you submit the application form, you will be redirected to a payment gateway where you can make your initial payment online.

When the initial payment is complete, you will receive a payment receipt and an application acknowledgement number. Keep both of them safe, since they may come in handy when tracking the status of your application.

Once you are successfully registered with the NPS, you will receive a Permanent Retirement Account Number (PRAN). You can log into your NPS account with the PRAN allotted to you, make further contributions to the account as you wish, and manage your existing investments.

How to Invest in NPS Offline?

The Pension Fund Regulatory and Development Authority (PFRDA) has also appointed several Points of Presence (PoPs) to help investors invest in the NPS scheme offline. Here is a quick overview of the process you need to follow to open an NPS account offline.

• Step 1: Visit the Point of Presence - Service Provider (PoP-SP) nearest to you. You can find details of all of the PoP-SPs in India on the website of the CRAs.
• Step 2: Collect the Subscriber Registration Form (SRF) and fill out all of the details on the form.
• Step 3: Attach all of the necessary documents to the form and submit them to the PoP-SP.
• Step 4: Make the initial payment via cash, cheque, or demand draft (DD). Keep in mind that the PoP-SP may levy a nominal service charge for processing the payment.

Once the payment is made, the PoP-SP will provide an acknowledgement number, which you can use to track the progress. Your application will be processed, and a Permanent Retirement Account Number (PRAN) kit will be sent to your address within a few days. Using the PRAN, you can make further contributions to your NPS account and manage your investments as you see fit.

Conclusion

With this, you must now be aware of how to invest in the NPS scheme in 2024. The National Pension Scheme offers a strategic approach to securing your financial future. In addition to helping you save for retirement, the scheme also offers tax benefits and the potential for wealth creation through market-linked returns.

Disclaimer: INVESTMENT IN SECURITIES MARKET ARE SUBJECT TO MARKET RISKS, READ ALL THE RELATED DOCUMENTS CAREFULLY BEFORE INVESTING. The asset classes and securities quoted in the film are exemplary and are not recommendatory. SAMCO Securities Limited (Formerly known as Samruddhi Stock Brokers Limited): BSE: 935 | NSE: 12135 | MSEI- 31600 | SEBI Reg. No.: INZ000002535 | AMFI Reg. No. 120121 | Depository Participant: CDSL: IN-DP-CDSL-443-2008 CIN No.: U67120MH2004PLC146183 | SAMCO Commodities Limited (Formerly known as Samruddhi Tradecom India Limited) | MCX- 55190 | SEBI Reg. No.: INZ000013932 Registered Address: Samco Securities Limited, 1004 - A, 10th Floor, Naman Midtown - A Wing, Senapati Bapat Marg, Prabhadevi, Mumbai - 400 013, Maharashtra, India. For any complaints Email - grievances@samco.in Research Analysts -SEBI Reg.No.-INHO0O0005847