How to Invest in NPS: Step-by-Step Instructions

Established in 2004 by the government of India, the National Pension Scheme (NPS) ensures financial security after retirement. This scheme helps people regularly put a share of their income aside. This share is managed by professional fund managers under the supervision of PFRDA. Initially, the scheme was for government employees only. But now, everyone can Invest in NPS except for people in the armed forces. Through NPS, people can plan for a regular pension income to help them through their golden years.

Types of NPS Accounts

Learning about the types of accounts in the National Pension Scheme (NPS) is important before making investment choices. There are two main types of NPS accounts:

Tier I NPS Account

The Tier I account is the primary retirement account. If you open this account, the Permanent Retirement Account Number (PRAN) will be given to you, which is a unique 12-digit identifier. Starting with a minimum of Rs 500 is the first step.

The contribution on this account has no limit but the funds cannot be withdrawn before you reach 60. After you turn 60, you can withdraw 60% of the accumulated amount. Moreover, a Tier I account investment is exempted from income tax under Section 80 CCD.

Tier II NPS Account

Tier II accounts are also available for account holders. These are supplementary accounts for customers who already have Tier I accounts. This account is maintained voluntarily and goes along with a minimal initial deposit.

After the first deposit, you can continue to deposit any amount you like. As opposed to Tier I accounts where the investments are tax-free, the investments in Tier II accounts do not provide any tax exemption. 

Documents Required to Invest in the National Pension Scheme

Investment in the National Pension Scheme (NPS) requires certain documents to complete the procedure promptly. Regardless of whether you choose the online or offline mode, it is imperative to have the required paperwork ready. Here are the documents you will need to Invest in NPS

• Aadhaar Card

• Netbanking info

• Passport-size photos

• A scanned photo of your signature

• PAN Card

Steps to Invest in NPS

To begin investing in the National Pension Scheme (NPS), follow these simple steps:

Step 1: Go to the eNPS website which is hosted on nsdl.com. You can browse through the following link https://enps.nsdl.com/eNPS/NationalPensionSystem.html. After opening the website go to the “registration” section.

Step 2: Complete the form by adding all the necessary information and verify using the one-time password which will be sent to your registered mobile number.

Step 3: Select the desired account class of "Tier 1,'. To open a Tier 2 account you must already have a Tier 1 account as mentioned above. 

Step 4: Select the fund manager  from the 8 options provided . Choose your preferred one.

Step 5: Make a choice between auto and active investments. The auto mode will restructure your portfolio based on your age. With the active mode, you can define your own assets.

Step 6: Supply a list of nominees with their respective percentages or shares.

Step 7: Submit the required documents in the given format only.

Step 8: Submit the initial deposit of Rs. 500 and proceed with the registration process.

Step 9: After registration has been completed and approved, you will get a PRAN number assigned to you. Save it for future use.

Conclusion

You must properly plan your retirement. Deciding to invest in an NPS scheme gives both you and your money a chance to grow in compounded ways. When you invest in NPS online, there are a number of benefits. You can save your money and also get NPS tax benefits while you save.

Furthermore, NPS offers you a fixed monthly income when you reach 60 years of age. Make use of both types of NPS accounts to avail funds when the need arises. If you are looking for more personalised advice, getting help from a financial advisor is the best course of action.