As we all know that opening a National Pension System (NPS) account was an arduous process earlier, the introduction of new eNPS has made the process no more than thirty minutes. The new system has not just made the process simpler and time-saving but also seamless and cost-effective. With the new eNPS portal, Tier-I and Tier-II account or both can have an opportunity to open a new NPS account online and make investments further.
For the past few years, the Pension Fund Regulatory Development Authority (PFRDA) in India has been looking for ways to develop and operationalize online transaction schemes for existing and prospective NPS subscribers. Fortunately, the regulatory board has built a great online platform where you can easily register and contribute to the Permanent Retirement Account (PRAN) under the eNPS directly.
What is NPS?
The National Pension System Trust also known as NPS was established in 2008 February by PFRDA to take care of funds and assets under the NPS system. The beneficiaries of the NRS trust are the individuals who have subscribed for NPS.
From 2009 onwards, the Government of India opened the NPS scheme for every Indian citizen along with the corporate sector from December 2011. Any individual whether working for a private sector or a public company can avail of the benefits listed under the plans after their retirement period before enrolling under the NPS. The individual who joins the NPS is known as a ‘subscriber’ in the NPS and they are eligible to open an account with CRA, Central Record Keeping Agency. The account is further identified through PRAN.
You can say that an NPS account is similar to Unit Linked Investment Plan (ULIP) and Unit Linked Pension Plan (ULPP). The centre had made NPS a mandatory scheme for every employee who joined service on or after 2004 January. Since then, many state governments have adopted NPS and at present, more than 12 million subscribers have registered themselves under the NPS scheme by investing more than 4,06,952.62 crores.
What is eNPS?
eNPS can be described as an online NPS portal that is hosted by CRA in which subscribers can contribute after registering online. With eNPS, Indian citizens can register under NPS easily, generate their individual PRAN and contribute to their retirement savings. The prospective eNPS subscriber under a private company can also register through PAN & Bank account or with the help of Offline e-KYC.
At present, every government sector employee is required to register under the NPS either through physical documents submission with CRA or through an online PRAN generation Module that is accepted by the Government’s Nodal Offices. After the introduction of eNPS by PFRDA, government sector employee will be able to facilitate their contributions through online onboarding under the eNPS. An existing NPS subscriber working with other sectors or entering the Government sector from other companies can get an opportunity to shift from one sector to the others with the new eNPS.
Who can register under the new eNPS?
Under the NPS and new eNPS, two types of account can subscribe that includes Tier I and Tier II.
- Tier I account: these accounts are held by individuals who contribute their savings for retirement into a non-withdrawable account. Though, pre-mature withdrawals can be allowed before 60 years of age only if the subscriber has completed his/her 15 years of service. A 50% of the amount contributed can be withdrawn if the subscriber has made a minimum of 25 years of service.
- Tier-II account: this account is opened by subscribers who save voluntarily for their retirement and are free to withdraw their savings as per desire. Tier-II account is similar to bank saving account and has been made available for every Indian since 2009 December including government and corporate sector employees. Though if you want to have a Tier II account, you must have an active Tier I account as well.
How can you open an eNPS account online?
You can easily open an eNPS account online if you own a bank account in any of the 17 registered banks specified by NSDL (National Securities Depositary Ltd.).
- If you have already linked your PAN with your savings account in your bank, simply log on to the eNPS portal and apply online under the official website.
- The KYC process will be taken care of by your bank itself along with other processing systems.
- Similarly, if you have linked your Aadhar card with your bank account, the PFRDA will approve your eNPS registration by approving Aadhar.
- Though, to apply online you may need to link your mobile and saving account number as well.
- You will receive an OTP after registration for account verification.
- Do activate your online banking system before opening an eNPS account online.
- After filling the necessary forms, your picture and data will be extracted and verified as per the Aadhar database.
- To register, you will be asked to upload your signature in a .jpeg or .jpg format which must be contained in a file sized 4-12 kb.
- If you want to replace your Aadhaar picture with a new one, you can upload them at this phase.
- After approval of your new ENPS account, make an initial deposit through a Credit/Debit card or online Net banking.
Can an NRI open a new eNPS account?
Under the new NPS provisions, NRI can also open an eNPS account following some steps mentioned below:
- An NRI must choose whether their bank status is repatriable or not.
- Next, they need to furnish mandatory details regarding NRE or NRO account and upload a scanned image of their passport.
- Lastly, the NRI has to select from where he/she seek to communicate from their eNPS i.e., from their permanent address in India or a foreign country.
- To facilitate overseas communication, extra charges may be applied.
Benefits of e-NPS account
- Easy onboarding for private and public sector employees along with online authorization and verification of employees by Nodal officials.
- With eNPS, you can register for a new account or convert your old account into an online portal through a paperless process and sign-in OTP.
- Nodal officers work made easier as compared to the manual process for account opening. They are now free from handling papers or dispatching physical CRA forms to new applicants.
- The cost of account opening is optimised due to end-to-end digitization.
- Timely PRAN generation along with timely NPS contribution through an easy money deposit scheme can lead to higher investment benefits.
- Since every subscriber fills the data online for the eNPS scheme, there is very little chance to onboard with errored data or consequent decline of forms due to misinterpretation.
eNPS account drawbacks
Although the new eNPS procedure has brought many advantages for Indian citizens due to its cost structure, it comes with a few drawbacks too.
- Under the eNPS, the equity exposure is capped at 50% while the retirement age is fixed at 60 years. Why restrict ourselves to invest in equities to only 50%?
- Many terms and conditions are applicable for pre-mature amount withdrawals, after retirement age and while buying an annuity product. Moreover, you have to buy an annuity product when you choose to exit from an eNPS account.
- Thirdly, an eNPS subscriber gets various tax exemptions under Section 80CCD and 80CCD (1b) for contributions made but when their amounts are Tier II subscribers scheme unattractive.
released after maturity, they are taxed as per the scheme. Also, only Tier I subscribers are eligible for tax benefits which make the