Retirement is inevitable, especially for salaried employees, who are expected to retire after a certain age. Most private organisations do not offer the facility of lifelong pensions to employees, which makes it difficult for them to have a source of income in the absence of salary. Hence, most individuals ensure that they start retirement planning at an early age to have an adequate amount after retirement. The Indian government heavily encourages retirement planning by offering various pension schemes that allow investors to receive a monthly pension based on the contributions they made when they were earning. One such comprehensive pension scheme is the National Pension System (NPS).

If you are an earning individual and want to save for retirement to receive a regular monthly pension, you can invest in the National Pension Scheme. However, you will have to submit all the NPS documents required to register for the NPS. This blog will help you understand the documents required to open an NPS account online so you can start investing in the scheme without any hassle.

• The National Pension System (NPS) is a government-backed retirement savings scheme offering flexible contributions, tax benefits, and a regular pension after retirement.
• Investors can open Tier I and Tier II accounts with different restrictions on premature withdrawal.
• NPS offers numerous tax benefits to investors as they are eligible for a tax deduction of up to Rs. 1.5 lakh under section 80C and a further deduction of Rs. 50,000 under section 80CCD(1B).
• Investors have to choose between active choice, which lets them choose their own asset allocation, or auto choice, which automatically adjusts the allocation of assets according to the investor’s age.

The National Pension System is a savings scheme introduced by the Indian government to help Indian citizens effectively save for retirement. The scheme was launched by the Indian government for government employees but later extended to all Indian citizens and NRIs in 2009. All Indian citizens and NRIs between the ages of 18 and 70 are eligible to invest in NPS through Tier I or Tier II accounts. The Tier I account is the primary retirement account that has restrictions on withdrawals and is mandatory for all participants. This account is for accumulating contributions until the retirement age and providing tax benefits to the investors. The Tier II account is a secondary account that offers investors the option to withdraw their contributions prematurely after specific conditions are met. However, this account does not offer tax benefits to investors unless the investor is a government employee.

Contributions and fund management

There are no fixed requirements for contribution amounts under NPS, but the Tier I account needs a minimum contribution of Rs. 500 for account opening and a minimum of Rs. 1,000 must be deposited annually to keep the account active. On the other hand, to open a Tier II account, you must deposit a minimum of Rs. 1,000 and a minimum of Rs. 250 annually to keep the account active. However, investors have the flexibility to decide how much and how often to contribute based on their financial goals and capacity. NPS also allows investors to choose between two investment options: active choice and auto choice. In active choice, investors can choose the asset allocation personally across three asset classes: equity (E), corporate debt (C), and government securities (G). On the other hand, auto choice allows investors to automatically adjust the allocation of assets according to the age of the investors.

Withdrawals and retirement benefits

Investors can withdraw the amount from their NPS account after reaching the age of 60. Upon retirement, the investor can withdraw up to 60% of the accumulated amount without any tax liabilities. However, the remaining 40% must be used to purchase an annuity, which provides a regular pension. There are restrictions on withdrawal in the Tier I account unless it is for specific purposes. In the case of the demise of the primary subscriber, the entire NPS amount is transferred to the nominee. NPS is considered one of the best schemes for tax benefits as the contributions made towards the Tier I account are eligible for a tax deduction of up to Rs. 1.5 lakh under section 80C. Moreover, subscribers can claim an additional Rs. 50,000 deduction under section 80CCD(1B).

If you are looking for safe investment option, then you can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 8.60% p.a.

Here are the documents needed for the NPS account:

The National Pension Scheme is a comprehensive pension scheme launched and managed by the government of India which allows investors to make periodic contributions to their NPS account and receive a lump sum and regular pension. NPS is ideal for individuals who want to build a stable retirement corpus without having to constantly monitor their investments. NPS allows the investors to claim tax benefits on the contributed amount every year, significantly reducing their taxable income and resulting in effective tax savings. You can open a Tier I and Tier II account by submitting the NPS scheme documents required to start contributing and building your retirement corpus. However, analyse both the auto choice and active choice options before starting your NPS contributions for a better investment approach.