NPS Contribution: Vision to a Financially Secure Retirement

NPS Contribution to Building Post-Retirement Corpus

National Pension Scheme/ System (NPS) is a long-term voluntary investment plan governed by the Central Government and regulated by the Pension Fund Regulatory and Authority (PFRDA). Those who open an NPS account need to contribute regularly to generate enough corpus and streamline a regular source of income for retirement. Let’s understand the concept of NPS contribution, how to contribute, the charges applied, and more.

What is NPS Contribution?

NPS contribution is the regular deposits you or your employer make into the NPS account for long-term savings and to build a retirement corpus. You can start contributing to NPS when you are above 18 and work as an employee or a self-employed individual. Upon retiring, you can withdraw up to 60% of the corpus as a lump sum and utilise the remaining amount to gain regular pension benefits. 

The accumulated retirement corpus depends on your investment, period, and rate of return. To gain more clarity on how much contribution you need to make towards NPS to gain a sufficient retirement corpus, use the NPS calculator, a handy tool to help you make better investment decisions. 

Why is it Important to Contribute to NPS?

NPS benefits are not limited to securing your financial future during your golden years. Taking steps ahead, the regular NPS contributions can bring multiple benefits to you, mentioned as:

Long-Term Savings: NPS is a systematic long-term investment scheme that grows your retirement fund through compounding. Your disciplined contributions to NPS allow you to accumulate a significant corpus for your retirement. 

Flexible Investment: Under NPS, various investment options, such as equities, corporate bonds, government securities, and alternate funds, are available. To maximize the benefits of each option, you can choose one based on your risk tolerance and financial requirements. 

Fund Withdrawal: You can withdraw your accumulated corpus in NPS partially before 60 or upon reaching superannuation without closing the account. However, a maximum of three partial withdrawals are allowed during the entire tenure of the NPS account. 

Regular Income Post-Retirement: NPS ensures you remain financially secure during your golden years. The accumulated corpus can provide a lump sum and ensure a regular income stream, making you financially secure. 

Tax Benefits: The contributions made in NPS are eligible for tax deductions for both employees and employers. The NPS contributions by employees gain tax deductions under Section 80CCD(1) and 80CCD(1B) of the Income Tax Act, while the contributions by employers gain tax deductions under Section 80CCD(2). In addition to this, the withdrawals are tax-exempt.

NPS Contribution Options Available

You can add contributions in NPS in two different accounts: Tier 1 and Tier 2. Both accounts serve different purposes and accomplish separate financial goals. A Tier 1 account is mandatory to open a Tier 2 account and start investment. Let’s understand how the contribution for Tier 1 and Tier 2 NPS works:

Who can Make Contributions to NPS?

Employers, employees, and self-employed individuals can add money to NPS account based on certain parameters mentioned below:  

NPS Contribution by Employee

Salaried or self-employed individuals can contribute to the NPS account to save for retirement. Employees can contribute up to a certain percentage of their monthly salary. Let’s understand the NPS contribution and tax benefits applicable:

NPS Contribution by Employer

As per the NPS rules outlined by PFRDA, government employees automatically receive NPS contributions from their employers. Private employers' contributions are optional. However, some organisations provide NPS contributions as part of their employee benefits program. Private employers may contribute 10% of the employee’s monthly salary, while for government employees, the cap is 14%. The employer contribution towards the NPS account is eligible for tax benefits under Section 80 CCD(2) of the Income Tax Act. 

NPS Contribution by NRI

For a Non Resident Indian (NRIs) above 18 can, opening an NPS account and contributing to Tier 1 and Tier 2 accounts is admissible. They can add money to NPS accounts using NRE/ NRO bank accounts. The contributions differ for NRIs in the following manner:

How to Make NPS Contributions?

You can make NPS contributions online and offline based on your suitability and preferences. Once you open an NPS account, you receive a Permanent Retirement Account Number (PRAN) that you can use to make contributions to NPS online and offline. 

Methods to Deposit NPS Online 

1. Through CRA Portal

To monitor all the functioning, starting from registration, issuing PRAN, contribution, and other NPS activities, the PFRDA has appointed two Central Record Keeping Agencies (CRAs). You can make an NPS contribution to Tier 1 and Tier 2 accounts using any of the CRA systems in simple steps:    

• Simply create an account on a preferred CRA.
• Receive your PRAN details and password.
• Start your NPS contributions per your financial suitability.

2. Through eNPS Portal

If you have selected NSDL as your CRA, follow these steps to make NPS contributions online:

• Go to the eNPS portal. 
• Select the ‘Contribute’ option.
• Log in with your PRAN and password (provide important details and verify the Captcha). 
• Upon successful login, select the NPS account type, provide the amount to contribute, and make the required declarations before making the payment. 
• Once the payment is complete, the contribution should appear in your account.

3. Through Mobile Apps

You can also choose to make NPS contributions using handy mobile applications such as NSDL e-Gov and KFINTECH CRA by following the given instructions: 

• Download any of the preferred applications from the App Store or iOS Store.
• Log in with your PRAN details and password. 
• Choose the ‘Contribute’ option.
• Follow the provided instructions and make the payment. 

Methods to Complete NPS Contribution Offline 

1. By Visiting the Nearest POP/ POP-SP

• To open or contribute to NPS, approach the nearest Point of Presence (POP)/ POP-SP or bank branch.
• Receive and fill out the NPS contribution form. 
• Submit the form with relevant documents and amounts to the representative. 
• Receive the receipt for the confirmation. 

Note: You can make the NPS contribution offline through cash, cheque, or DD. 

2. Through the Nodal Office

• Visit the nearest Nodal office authorised by PFRDA.
• Fill out and submit the required form with relevant documents and the contribution amount. 
• The nodal officer then forwards the amount to the relevant Pension Fund Manager for further processing. 

Where Can I Get the NPS Form?

The NPS contribution form is an important document you need to fill out and submit in case you want to make an NPS contribution offline. The form contains sections to provide important details about the NPS subscriber's personal information, NPS account number, contribution amount, PRAN details, and mode of payment. 

You can easily obtain the NPS form from the nearest Point of Presence (POP) or download it from the NPS official website. 

How can I Check NPS Contribution Statements?

It is important to track your NPS account regularly to make insightful investment decisions. You can easily check NPS contribution details online and offline. 

Check NPS Contribution Statement Online

Through Official Website:

• Visit the National Pension System Trust (NPS Trust) official website at https://www.npstrust.org.in/.
• On the homepage, select the ‘View My NPS Holdings’ option.
• You will be redirected to the NPS login page, where you can select your preferred CRA to log in.
• Provide PRAN details, password, and other details (if required).
• Click to get OTP or submit. 
• On successful completion, select the ‘Contribution’ section. 
• You will be able to access your NPS contribution statement.

Via Mobile Application:

• Download the NPS mobile application.
• Log in to your NPS account using your PRAN details and password. 
• Navigate to your Tier 1 or Tier 2 tab to view your total NPS balance. 

Check NPS Contribution Statement Offline

Visiting the Branch:

• Reach out to the Nodal Office or the intermediaries.
• Connect with the representative and provide your PRAN details. 
• They will provide you with the NPS account details and statement.

Charges for Making NPS Contribution

To make NPS contributions online or offline, you must bear certain charges. These charges vary based on your contribution method, which may be through intermediaries, the NPS CRA platform, etc.

Let’s understand the various NPS contribution charges involved:

1. CRA Charges

2. POP/ POP-SP Charges

3. Pension Fund Charges

4. Payment Gateway Service Charges (on eNPS Platform)

Important Guidelines and Process Regarding NPS Contribution

Look at the important guidelines and details about the NPS contribution: 

• Choose the official portals to make NPS contributions. 
• Keep your PRAN details handy. 
• Provide true details, like date of birth, etc.
• You can make a payment using any preferred mode of payment. UPI payments are also acceptable. 
• There’s no maximum amount limit while making NPS contributions, based on your preferences. 
• You can contribute to NPS as many times a year as you want.

Final Words

Making regular NPS contributions is important to gaining financial freedom during their golden years and providing them with an ensured income. NPS is a secure and structured gateway to achieve a financially stable retirement. Contributing to NPS, you can gain certain benefits, including tax advantages, long-term savings, a flexible investment tool, and the option to withdraw NPS funds as required. Gain financial freedom by opening an NPS account with a reliable fund provider.

* Disclaimer: The details, facts, or figures given here are intended solely for the reader's informational purposes and should not be relied upon for personal, medical, legal, or financial decisions. Please visit the insurer's website for the latest updates. We do not endorse any particular insurance company or insurance product provided by any insurer.

Frequently Asked Questions

Question: Can I increase the NPS contribution amount for the coming years?

Answer: Yes, increasing or decreasing your NPS contributions is flexible. Hence, based on your financial circumstances, you can increase the NPS contributions to boost your retirement corpus or decrease it whenever necessary, meeting the minimum annual requirements. 

Question: Who can contribute to NPS?

Answer: Any Indian citizen between 18 and 65 can open an NPS account and start contributing. This includes salaried employees, self-employed individuals, and NRIs. 

Question: Who is not eligible to contribute to NPS?

Answer: The individuals not eligible to make NPS contributions are: 

• Persons of Indian Origin (PROs)
• Overseas Corporate Bodies (OCBs)

Question: How much do I need to contribute to NPS?

Answer: You can contribute to NPS as much as you want upto 10% of your basic salary with the minimum NPS contribution limit of Rs. 1,000 per annum for Tier 1 accounts and no such restrictions for Tier 2 accounts. 

Question: Can I withdraw NPS contributions?

Answer: Yes, you can withdraw NPS funds made to your Tier 1 account under certain situations, such as specified medical emergencies, higher education, etc. You cannot withdraw complete NPS contributions until retirement, terminal illness, or death. The maximum number of withdrawals allowed is three during the whole tenure. 

Question: Can I stop contributing to NPS?

Answer: When there’s no restriction towards contributing to NPS Tier 2 account, an NPS Tier 1 account requires a minimum annual contribution of Rs. 1000. If not done, your NPS account will freeze, and you will have to unfreeze it, paying minimum contribution amount and applicable penalty.

Question: Can I pay the NPS contribution by credit card?

Answer: Yes, you can make NPS contributions online using your credit card. 

Question: Is it possible to change the NPS contribution amount?

Answer: Yes, you can change your contribution amount based on your financial suitability with a minimum annual NPS contribution limit of Rs. 1,000. 

Question: What is the minimum contribution in NPS?

Answer: The NPS minimum contribution differs for Tier 1 and Tier 2 accounts in the following way:

• NPS Minimum Contribution to Tier 1 Account Opening: Rs. 500
• NPS Minimum Contribution to Tier 2 Account Opening: Rs. 1,000
• NPS Minimum Contribution to Tier 1 Account: Rs. 500
• NPS Minimum Contribution to Tier 2 Account: Rs. 250

Question: Is there any restriction to paying NPS contributions?

Answer: You can contribute to NPS as often as you like, monthly, quarterly, half-yearly, or annually. Alternatively, you can set up a Systematic Investment Plan (SIP) to make automated NPS contributions. 

Question: How much time does it take to reflect the NPS contribution to my statement?

Answer: Your contribution to NPS can take some time to reflect in your NPS account statement. It takes two working days from the date of a successful transaction to make your NPS contribution visible. 

Question: Can I add money to my NPS account before receiving my PRAN card?

Answer: Once your PRAN card is generated, you can start contributing to the NPS account whether or not the physical copy of the PRAN card has been received.