The National Pension System (NPS) is a popular investment option that is designed to help individuals save for their retirement. It is a voluntary, defined-contribution retirement savings scheme that is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
One of the providers of the NPS scheme is the State Bank of India (SBI), which offers an online platform for investors to open and manage their NPS accounts. In this blog post, we will guide you through the step-by-step process of opening an NPS account online in SBI.
What Is SBI
SBI stands for State Bank of India. It is a government-owned multinational public-sector bank with its headquarters in Mumbai, India. It is one of the largest banks in India in terms of assets, deposits, branches, and employees. SBI offers a wide range of banking and financial services to individuals, businesses, and corporates in India and overseas. It has a network of over 22,000 branches in India and around 190 overseas offices in 36 countries. SBI offers various products and services such as savings accounts, current accounts, loans, credit cards, investment products, insurance, and digital banking services.
What Is NPS
NPS stands for National Pension System. It is a voluntary, defined contribution retirement savings scheme launched by the Government of India in 2004. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). NPS aims to provide pension income to its subscribers in their old age by encouraging them to save regularly during their working life.
Under the NPS, individuals can open a pension account and contribute to it regularly till retirement. The contributions made by the subscriber are invested in a mix of equity, corporate bonds, and government securities by Pension Fund Managers (PFMs) appointed by PFRDA. The accumulated amount, along with the returns generated, is paid to the subscriber as a pension after retirement.
NPS offers two types of accounts: Tier-I and Tier-II. Tier-I account is a mandatory account, while Tier-II is an optional account. The minimum contribution for a Tier-I account is Rs. 500 per month or Rs. 6,000 per annum. It also offers tax benefits to subscribers under Section 80C and Section 80CCD of the Income Tax Act.
How To Open NPS Account Online In SbI
To open an NPS (National Pension System) account online in SBI (State Bank of India), you can follow the below steps:
- Visit the SBI eNPS portal at https://enps.nsdl.com/eNPS/NationalPensionSystem.html.
- Click on the “National Pension System” button and then click on the “Registration” button.
- Select the “New Registration” option and click on the “Continue” button.
- Choose the “Individual Subscriber” option and click on the “Continue” button.
- Fill in the required personal details like name, date of birth, email ID, mobile number, etc.
- Enter your PAN (Permanent Account Number) and select your bank from the drop-down list. Then, click on the “Continue” button.
- Provide your bank account details and select your pension fund manager (PFM) from the list of available PFMs.
- Make the initial contribution towards your NPS account. You can either make a payment through net banking or use your debit card for the transaction.
- Finally, generate the Permanent Retirement Account Number (PRAN) and print the completed form. Sign and send the form to the CRA (Central Record Keeping Agency) within 90 days of generating the PRAN
Features Of An NPS Account
Here are some of the features of an NPS (National Pension System) account:
- Voluntary: NPS is a voluntary pension scheme. Any citizen of India between the ages of 18 and 65 can open an NPS account.
- Defined contribution: NPS is a defined contribution scheme, which means that the amount of pension you receive is based on the contributions made by you and the returns generated by the pension fund.
- Tier-I and Tier-II accounts: NPS offers two types of accounts – Tier-I and Tier-II. Tier-I is a mandatory account that comes with restrictions on withdrawal, whereas Tier-II is a voluntary account that allows the subscriber to withdraw money anytime.
- Investment options: NPS offers a range of investment options to its subscribers, including equity funds, corporate bonds, and government securities. The subscriber can choose their preferred investment option based on their risk appetite and investment goals.
- Pension Fund Managers (PFMs): NPS allows subscribers to choose from several Pension Fund Managers (PFMs) to manage their investments. The PFMs are regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
- Tax benefits: NPS offers tax benefits to its subscribers. The contributions made towards the NPS account are eligible for tax deduction under Section 80C of the Income Tax Act, and an additional deduction of up to Rs. 50,000 is available under Section 80CCD (1B).
- Annuity options: After retirement, the subscriber can use the accumulated corpus to purchase an annuity plan from an insurance company. NPS offers various annuity options, including life annuity, joint life annuity, and an annuity with a return of purchase price.
Eligibility For SBI’s National Pension Scheme
To be eligible to open an NPS (National Pension System) account with SBI (State Bank of India), you must fulfil the following eligibility criteria:
- Age: You must be between the ages of 18 and 65 years at the time of opening the NPS account.
- Citizenship: You must be a citizen of India to open an NPS account with SBI.
- KYC compliance: You must be KYC (Know Your Customer) compliant to open an NPS account. This means you must provide valid identity proof, address proof, and a photograph to SBI.
- Bank account: You must have an active savings account with SBI or any other bank to make contributions towards the NPS account.
- PAN: You must have a valid PAN (Permanent Account Number) to open an NPS account.
- Contribution amount: The minimum contribution amount for an NPS Tier-I account is Rs. 500 per month or Rs. 6,000 per annum. There is no maximum limit on contributions, but tax benefits are available only up to a maximum of Rs. 2 lacks per annum.
Step By Step Guide For Opening An NPS Account Online With SBI
Here is a step-by-step guide for opening an NPS (National Pension System) account online with SBI (State Bank of India):
- Visit the SBI eNPS portal: Go to the SBI eNPS portal at https://enps.nsdl.com/eNPS/NationalPensionSystem.html
- Click on “National Pension System”: Click on “National Pension System” on the homepage of the eNPS portal.
- Click on “Registration”: Click on “Registration” on the top menu bar of the page.
- Choose your account type: Select “Individual Subscriber” as your account type.
- Choose your account status: Choose whether you are an existing SBI customer or a new customer.
- Provide your PAN details: Enter your PAN (Permanent Account Number) details.
- Enter your personal details: Enter your personal details such as name, date of birth, and contact details.
- Choose your bank and upload documents: Select your bank from the list of banks, and upload the required documents such as address proof and photograph.
- Generate OTP and authenticate: Generate an OTP (One-Time Password) and authenticate your details.
- Make the payment: Make the initial contribution towards your NPS account. The minimum contribution amount is Rs. 500 per month or Rs. 6,000 per annum.
- Select your Pension Fund Manager (PFM): Choose your preferred Pension Fund Manager (PFM) from the list of PFMs.
- Submit your application: Review your application and submit it.
- Receive your PRAN: After the submission of the application, you will receive a Permanent Retirement Account Number (PRAN) from the Central Record Keeping Agency (CRA) within a few days.
How Is NPS Calculated?
The following factors are considered in calculating the NPS:
- Contributions made: The amount of contribution made by you towards the NPS account determines the corpus or the total amount of money accumulated in your account.
- Investment returns: The investment returns generated by the Pension Fund Manager (PFM) appointed by you also impact the corpus. The PFMs invest the corpus in various asset classes such as equity, corporate bonds, and government securities to generate returns.
- Retirement age: The age at which you retire also plays a role in determining the pension amount. If you retire at the age of 60 years, you can withdraw up to 60% of the accumulated corpus as a lump sum, and the remaining 40% must be used to purchase an annuity plan from an insurance company.
- Annuity rates: The annuity rates offered by the insurance company also determine the pension amount. The annuity rates depend on various factors such as the type of annuity plan chosen, the age of the annuitant, and the prevailing market conditions.
To sum it up, the NPS corpus is the sum of the contributions made by the subscriber and the returns generated by the investments made by the Pension Fund Manager. After retirement, the corpus is used to purchase an annuity plan, which provides a regular pension income. The pension amount received by the subscriber depends on the annuity rates offered by the insurance company.
How Much Deduction Is Allowed For NPS?
Deductions for National Pension System (NPS) contributions are allowed under Section 80CCD(1), 80CCD(1B) and 80CCD(2) of the Income Tax Act, 1961. The following deductions are allowed for NPS contributions:
- Section 80CCD(1): The maximum deduction allowed under Section 80CCD(1) is 10% of the salary (for employees) or 10% of the gross income (for self-employed individuals). The deduction is capped at Rs. 1.5 lakh in a financial year. This deduction is available to all individuals, including NRIs.
- Section 80CCD(1B): An additional deduction of up to Rs. 50,000 is allowed under Section 80CCD(1B) over and above the limit of Section 80C. This deduction is available to all individuals, including NRIs.
- Section 80CCD(2): For salaried individuals, an additional deduction of up to 10% of the basic salary and dearness allowance (DA) is allowed under Section 80CCD(2). There is no upper limit on this deduction. However, the total deduction claimed under Section 80C, 80CCC and 80CCD(1) should not exceed Rs. 1.5 lakh.
Is NPS A Better Investment Option Than PPF?
National Pension System (NPS) and Public Provident Fund (PPF) are both long-term investment options that offer tax benefits under Section 80C of the Income Tax Act, of 1961. However, they have different features and benefits that make them suitable for different types of investors.
Here are some key differences between NPS and PPF:
- Returns: NPS returns are market-linked and depend on the performance of the Pension Fund Manager (PFM) appointed by the investor. PPF returns are fixed by the government and are currently at 7.1% per annum (as of January 2022).
- Lock-in period: The minimum lock-in period for NPS is till the age of 60, while PPF has a lock-in period of 15 years. However, in PPF, partial withdrawals are allowed after 5 years.
- Contribution: In NPS, there is no fixed contribution amount, and the investor can decide how much to invest. In PPF, the minimum contribution is Rs. 500 per year, and the maximum is Rs. 1.5 lakh per year.
- Tax benefits: Both NPS and PPF offer tax benefits under Section 80C of the Income Tax Act, 1961. However, in NPS, an additional deduction of up to Rs. 50,000 is allowed under Section 80CCD(1B), while no such additional deduction is available in PPF.
Why Is NPS The Best
It is not accurate to say that NPS (National Pension System) is the “best” investment option for everyone, as the choice of investment depends on the individual’s financial goals, risk appetite, and investment horizon. However, NPS does have certain advantages that make it a good investment option for some individuals:
- Market-linked returns: NPS investments are linked to the market, which means that the returns are dependent on the performance of the Pension Fund Manager (PFM) appointed by the investor. This gives NPS the potential to offer higher returns than traditional fixed-income investments like FDs and PPFs.
- Tax benefits: NPS offers tax benefits under Section 80C, Section 80CCD(1), and Section 80CCD(1B) of the Income Tax Act, 1961. This means that investors can claim deductions of up to Rs. 2 lacks in a financial year, which can significantly reduce their tax liability.
- Flexibility: NPS offers investors the flexibility to choose the asset allocation (equity, corporate bonds, and government securities) of their investments. This means that investors can customize their investment portfolio to suit their risk appetite and investment goals.
- Low cost: NPS charges a lower fee compared to other investment options like mutual funds. This means that investors can save on fees and increase their returns.
- Long-term investment: NPS is a long-term investment option that is designed to provide a stable income stream during retirement. This makes it a good investment option for individuals who are looking to save for their retirement.
Conclusion On How To Open NPS Account Online In Sbi
To sum up, opening an NPS account online with SBI is a straightforward process that involves checking your eligibility, visiting the SBI NPS website, filling out the application form, submitting your documents, making your contribution, and monitoring your account.
It is a convenient way to invest in a secure and reliable retirement savings scheme that can provide you with financial stability during your golden years. By taking advantage of the online platform provided by SBI, you can open an NPS account in a hassle-free manner and start building a corpus for your retirement.