The Indian Government launched the National Scheme on January 1, 2004, for the citizens of India but with a few exceptions. Since May 1, 2009, the Indian Government has made the National Pension available to every Indian citizen and removed the earlier exceptions. Even though the Pension Fund Regulatory and Development Authority regulates the National Pension Scheme, the National Securities Depository Limited takes care of the record-keeping, customer care, and administrative services. The National Pension Scheme is available in two kinds of accounts- Tier-I and Tier-II. The present guide will teach you a few basic things about the NPS Tier 1 account.
Characteristics of the National Pension Scheme Tier-I Account
If you wish to subscribe to the National Pension Scheme, the Tier 1 account is the main account. It would be best to open the primary account in your name. A few characteristics of the NPS Tier 1 account are as follows:
- The NPS Tier 1 is a long-lasting investment account that will run until you turn sixty. After maturity, you can extend the maturity age by ten years and remain invested in the scheme until you turn seventy.
- If you meet financial requirements, such as education, wedding, medical expenses, etc., you can partially withdraw from the NPS Tier 1 account.
- You can earn tax deductions for investments from the Tier 1 account.
- Under one name, you can open only one Tier 1 National Pension Scheme account.
- Under specific terms and conditions, the premature closing of the Tier 1 National Pension Scheme account is available.
- The Tier 1 account is the primary account, and according to the 2015 regulations of the Pension Fund Regulatory Development Authority, you can withdraw from the scheme prematurely.
- If you are employed in the government sector and a Tier 1 account holder under the National Pension Scheme, your account invests the collected money in the bonds that the government or the corporate bodies hold.
- The corpus collected in the Tier 1 account of the holders employed in the private sector is invested in other investment options, such as shares, stocks, etc.
- If you are a contributor to the NPS Tier 1 account, you can withdraw the fund when you purchase or reconstruct your first residential property.
- You can access the account from any region in India. The account’s accessibility is regardless of your employer or job location.
- Even if you change your employment sector or job role, you can maintain the same National Pension Scheme Tier 1 account during your service term.
Eligibility Criteria for Opening the NPS Tier 1 Account
Regardless of the sector you are employed in, if you wish to open a Tier 1 account under NPS, it would be best to meet the eligibility criteria mentioned below:
- All citizens of India, residents or non-residents, can open a Tier 1 account under NPS. If you open a Tier 1 account as a non-resident Indian and relocate to another country, you can close your account.
- If you wish to open a Tier 1 account under the National Pension Scheme, you must be 18 to 60 years old upon submitting the National Pension Scheme form.
- Suppose you want to open a NPS Tier 1 account. In that case, you can contribute a minimum amount of Rs. 500. After a fiscal year, you can contribute a minimum amount of Rs. 1000 to maintain your Tier 1 account under the National Pension Scheme.
Documents Needed to Open a NPS Tier 1 Account
The documents needed to open a Tier 1 account under the National Pension Scheme are as follows:
- Registration Form
- Proof of Identity
- Proof of Residence Address
- Age Proof
Steps to Open a Tier 1 Account Under National Pension Scheme
Under the National Pension Scheme, you can open a Tier 1 account in two ways- online and offline. Both ways are explained below:
The online procedure for opening a Tier 1 account is as follows:
With the Help of Aadhaar Card
- You can open your account using your Aadhaar Card number.
- Your KYC verification will be done using your Aadhaar OTP verification, and you will receive the OTP on your registered mobile number.
- You can enter essential details after successful verification.
- You can upload your scanned signature and photograph to complete the registration procedure.
- You need to make the payment for your account.
With the Help of a PAN Card After KYC Verification
- If you have a valid PAN Card, you can open your account using your PAN Card.
- The partner banks will do the verification procedure.
- You can enter the essential details.
- You can upload your scanned signature and photograph.
- You need to make the payment to complete your registration procedure, where you must pay for your account.
The steps for the offline procedure are as follows:
- You can visit the official portal of NPS and download the PRAN application form.
- You can fill up the application form with the required details.
- You can attach your KYC documents and passport-size photos.
- After filling up your application form, you can submit it to the closest Point of Presence Service Provider.
- You can pay the required amount and contribute towards your NPS Tier 1 account.
Partial Withdrawal and Premature Closure
You can partially withdraw from your account if you require funds. You must fulfill certain rules for partial withdrawal or closing your account prematurely. The rules are as follows:
- You can partially withdraw from your account after you complete three years from the date of your investment.
- You can withdraw a maximum value of around 25%.
- Throughout the investment period, only three withdrawals are allowed.
- Your partial withdrawal must be valid.
- If you prematurely close your account, you can withdraw twenty percent of the lump sum, whereas eighty percent will be used in paying annuities.
Post-retirement planning is necessary to live a comfortable life financially when your income source ends. If you created a retirement fund, you could use the fund for your expenses after retirement. The National Income System is a retirement pension system that the Indian Government launched to aid you in planning your life after retirement.