National Pension System (NPS): How To Setup SIP In NPS To Get Same Day NAV On Your Contributions?

The NPS aims to offer financial protection in one's old age and is a government-aided voluntary retirement savings program. It is managed by the Pension Fund Regulatory and Development Authority (PFRDA) and invests in a mix of equities, corporate bonds, stocks, and other government securities for long-term growth.

NPS also permits disciplined investments by setting apart portions of funds to ensure uninterrupted and automated contributions at selected intervals. This enables NPS investors to implement systematic investment plans or SIPs easily at NPS. This guide will provide you with information about the process of creating SIPs with NPS, its advantages, and most importantly its key considerations.

What is SIP in NPS?

NPS SIP permits participants to make regular deposits into their NPS accounts in a systematic manner. Rather than a lump sum investment, SIP breaks the investment into fixed deposits at regular intervals which helps with discipline in retirement savings and also averaging out the cost of investment.

Why to register for NPS SIP?

• Set up auto-debit for regular investments
• Ensure consistent retirement savings
• Freeze the burden of large one-off investments

How to Set Up SIP in NPS?

Step 1: Create an NPS Account

First and foremost, to set up SIP, one has to have a working active NPS tier one account or a tier two account.

Complete the following steps to create your account:

1. Go to the eNPS website (https://enps.nsdl.com), or contact a registered Point of Presence like a bank or other financial institution.
2. Click 'Register' and then select 'Individual Subscriber.'
3. Enter your details and select a fund manager, asset allocation, and beneficiaries.
4. Complete the KYC verification step (using Aadhaar, PAN, or bank verification).
5. Make the initial contribution *(Rs 500 minimum for Tier I, Rs 1,000 for Tier II).
6. Generate your Permanent Retirement Account Number (PRAN).

You can start setting up SIP once your PRAN is active.

Step 2: Access Your NPS Account

1. Go to the CRA (Central Recordkeeping Agency) portal (NSDL or KFintech).
2. Login with your PRAN, password, and CAPTCHA.
3. Go to the 'Contribution' section.

Step 3: Setup SIP with Auto Debit

1. Under the contribution section, select 'Auto Debit/Recurring Contribution.'
2. Input your bank details to authorize auto-debit your account.
3. Select the SIP frequency of:
- Monthly
- Quarterly
- Half-yearly

4. Set the SIP amount (Rs 500 for Tier I, Rs 250 for Tier II).

Step 4: Use Net Banking to Configure a Standing Instruction

If your bank does not allow autopay through NPS, you can establish an ECS or Standing Instruction via Net Banking:

1. Access your net banking account.

2. Go to the page on 'Bill Payments' or 'Standing Instructions' section.

3. Pick NPS as the payer and use your PRAN as the reference number.

4. Set the payment amount and how often you want to pay (monthly/quarterly).

5. Upon approval, the SIP will be regularly taken out in line with the instructions given.

Benefits of Setting Up SIP in NPS:

• Disciplined Savings - Fixed payments build good exercise habits and enhance systematic retirement planning.
• Auto-Redeem Facility - There is no need to make payments on specific dates; SIP payments will be made automatically.
• Cost Averaging - Reduces risk by buying at various levels of increasing and decreasing markets.
• Tax Regulations - Contributions to Tier I are tax deductible under Section 80 CCD(1) and 80 CCD(1B) of the Income Tax Act.
• Grow Wealth In Retirement - Over time, small amounts invested on a regular basis add up to one large investment.

Key Things To Remember:

• Minimum Amount Required: Rs 500 for each SIP for Tier 1 and Rs 250 for Tier II.
• Flexible Frequency: Ability to pay once per month or once every three months or once every six months.
• Tax Advantages of Tier I: SIPs relating to Tier I are tax exempt while tax benefits are not provided in Tier II.
• Processing Time for Automatic Deductions: Provide enough money in your account before the deadline or risk failure.
• Change SIPs Whenever You Like: You can change SIP amounts or cancel auto debit anytime using the CRA portal of your bank.

Conclusion

Opening a SIP under NPS can greatly assist in effortlessly accumulating a retirement corpus. Automating investments helps keep you financially disciplined, guarantees steady appreciation, and lets you save on taxes. Whichever category you belong to, salaried or self-employed, contribution through SIPs to NPS regularly can make your post-retirement life easy and enjoyable.