Recently the relaxation allowed in respect of partial withdrawals as well as increased tax benefits further makes the retirement saving tool or NPS (national pension scheme) account more attractive for investors. The account was launched originally to provide pension benefit to government employees who joined service after December 31, 2003, but was later offered from May 2009 to the general public aged between 18 and 60 years.
Here we will discuss how much NPS subscriber can invest in the product as well as charges levied by different banks:
In the scheme, subscriber invests a portion of his or her salary towards their NPS account. The account can be opened with a minimum amount of Rs. 500 or Rs. 1000 annually. The account matures once the employee retires on attaining 60 years of age.
Further, upon maturity the proceeds from NPS account are divided into two components i.e. minimum 40% has to be invested within 3 years in an annuity plan of an insurance company regulated by the IRDAI to get monthly pension amount. And the remaining 60% of the retirement corpus can be withdrawn immediately which is tax-free or may be deferred till 70 years of age.
NPS account opening and transaction charges in different banks
NPS account is regulated by pension fund regulatory body Pension Fund Regulatory and Development Authority (PFRDA) and it allows operation of the NPS account both online as well as offline. A customer can open the account online by visiting the NSDL site.
Procedure to open NPS account offline
For manual or offline opening of the NPS account, you need to check for the nearest Point of Presence (PoP) terminal that allows NPS account opening, which may be a bank branch also. Once the suitable PoP point is traced, you need to fill in the NPS account opening form and submit it along with the KYC documents such as your aadhaar, PAN card, passport, voter ID, address proof and passport size photograph.
And after the NPS account is opened, the bank will hand over to you a ‘welcome kit' which contains the unique PRAN or Permanent Retirement Account Number card. Ensure to keep it safe as the card will allow you to identify and access your NPS account. Also for operating the account, the customer will be given a Telephone Password ("TPIN") and Internet Password ("IPIN").
Bank charges for NPS registration and operation
Some of the major banks including HDFC Bank, ICICI Bank, SBI and Axis Bank among others offer the facility but at a cost. Saying this we mean there are charges levied for both NPS account registration as well as for doing transactions in the account. Let us know such charges:
NPS registration or account opening charges: Lenders including HDFC Bank, Axis Bank, ICICI Bank and SBI charge Rs. 200 each as registration charges from subscribers. Additionally, all of these banks charge a minimum of Rs. 20 and maximum Rs. 25,000, which is some 0.25% of the contribution amount towards NPS, from every subscriber.
For other non-financial transactions: Such transactions are those that do not involve a contribution from the subscriber, each of these bank charge Rs. 20 per subscriber.
Maintenance charges: For maintenance or persistence of the account, these banks charge Rs. 50 on an annual basis.
Subsequent contribution charges: For subsequent contribution towards the account, SBI charges another minimum Rs. 20 and maximum Rs. 25,000, which reflects the total contribution amount per transaction per subscriber. There are no such charges in case of Axis Bank and ICICI Bank while HDFC bank levies 0.10% of the total contribution amount, which can range between minimum Rs. 10 and maximum Rs. 10,000.