National Pension Scheme Account with State Bank of India (SBI)

Updated on:  

08 min read

Retirement planning is one of the most important aspects of financial planning. If you are considering planning for your retirement, you might consider (NPS) National Pension Scheme as a part of your portfolio for retirement. NPS is a focused investment for one’s retirement. NPS invests the contributions of the depositors into various market-linked instruments such as equity and debts across market segments. Let us understand what is NPS scheme? its features and step by step guide for opening an NPS account with SBI.

What is an NPS (National Pension Scheme) Account?

The NPS is a social security scheme launched by the Central Government of India.

The New Pension Scheme is a contribution-based scheme that provides market-linked returns to pensioners. Initially, it was aimed at the Central Government employees only. However, NPS was subsequently extended by the Pension Fund Regulatory and Development Authority (PFRDA) to all citizens.

So, now an employee belonging to the private sector or someone who is self-employed can avail of the new pension scheme. It also offers portability across various locations and jobs. SBI is one of the banks where you can open an NPS account.

There are two type of NPS accounts Tire I and Tire II:

  • Tire I account allows deduction under section 80C of Rs.1.5 Lakh and an additional deduction of Rs.50,000 under section 80CCD(1B). Only partial withdrawals is available from this account subject to conditions. Also, at maturity , 60% of the corpus is tax exempt and can be withdrawn , whereas 40% of balance corpus is used to purchase annuity.
  • Tire II account is a voluntary retirement account. This account can be opened only when you have a Tire I account. Since FY 20-21, tax benefits have been extended to even Tire II accounts subject to compliance of lock in period.

Features of an NPS Account

The following are the salient features for both Tier I and Tier II types of NPS accounts:

  • NPS accounts can be opened at Point of Presence-Service Provider (POP-SP) banks.  
  • SBI is one such bank that accepts the application form and the required documents, getting the subscribers registered with the Central Recordkeeping Agency (CRA) to generate the Permanent Retirement Account Number (PRAN).
  • The PRAN will be needed for quoting in all future transactions.
  • Tier I and Tier II are the options available.

inline CTA
Invest in Direct Mutual Funds
Save taxes upto Rs 46,800, 0% commission

Eligibility for SBI’s National Pension Scheme

The most important eligibility criteria for an individual to apply for the SBI National Pension Scheme are: 

(i) An individual should be between the age of 18 to 60 years. 

(ii) Based on the KYC norms, the following documentation is required:

  • Photo Id proof
  • Date of birth proof
  • Address proof
  • Application form

(iii) In the case of Tier I type of NPS account:

  • The minimum contribution for account opening is Rs.500
  • The minimum amount payable for every contribution is Rs. 500
  • The minimum Required Account Balance at the end of every financial year is Rs. 6,000
  • There must be at least 1 minimum contribution during a year.

(iv) In the case of Tier II type of NPS account:

  • The minimum contribution for account opening is Rs.1,000
  • The minimum amount payable for every contribution is Rs. 250
  • The minimum Required Account Balance at the end of every financial year is Rs. 2,000
  • There must be at least 1 minimum contribution during a year.

(v) For an NPS Tier II account, an individual has to first open an active Tier I account for activating the Tier II account. 

(vi) There is a minimum contribution of Rs. 1500 at the time of account opening for a composite account for Tier I and Tier II together. 

(vii) It is mandatory to submit a cancelled cheque for a composite application or Tier II application with the application form.

Step by Step Guide for opening an NPS account online with SBI

Make sure you have the following documents ready:

  • Aadhar Card and PAN number; these must be linked with your SBI account
  • Netbanking facility or debit card
  • Scanned image of a passport size photo
  • Scanned image of your signature

Once you keep the documents ready, follow the below mentioned steps to open the account:

  1. Log on to the NPS website
  2. Click on ‘registration’ and choose ‘Individual’ 
  3. Enter your PAN/Aadhar Card number and an OTP will be sent to the registered mobile number for verification 
  4. Choose a type of account – Tier I or Tier II.
  5. Enter your OTP and your personal details. If Aadhar is used, some details will be prefilled in the form. Submit to generate an acknowledgement number.
  6. You will have to then choose from any of the several Pension Funds provided in the NPS list on the portal. In this case, choose SBI Pension Fund Pvt. Limited.
  7. You have to then choose the mode of Investment.  In the case of an auto mode, the equity allocation changes with age. With active mode, you decide the mix.
  8. Next, assign your Nominee(s) by providing the details of people who should get the corpus in the eventuality of the investor’s death.
  9. If Aadhar Card is not used you will be required to upload a passport size image. If Aadhar has been used, then only a signature needs to be uploaded.
  10. The next step is to make a contribution to the NPS account and get a PRAN. The minimum amount is Rs 500 for Tier I and Rs 1,000 for Tier II. Pursuant to payment being approved, a PRAN would be allotted As a final step, take a print of the completed form, paste your photo, sign it and mail the same within 90 days to the CRA office.

Frequently Asked Questions

How is NPS calculated?

NPS schemes invest the corpus in equity as well as debt instruments depending on the age of the investor. Hence NPS also uses compounding interest to calculate the returns.You can also calculate your estimated return on NPS investments using cleartax NPS calculator.

How much deduction is allowed for NPS?

Deduction for NPS is allowed under section 80C limit of Rs.1.5 Lakh. However, an additional deduction of Rs.50,000 for NPS contribution is allowed under section 80CCD (1B). Hence one can claim a total deduction of Rs.2 lakh by investing in NPS.

Is NPS a better investment option than PPF?

NPS investments are linked to the market, whereas investments in PPF are fixed return investments fully backed by the government. Also, NPS investment is to be made till the age of retirement i.e 60 years, whereas PPF has a lock-in period of 15 years with partial withdrawals allowed after 5 years. Deduction for both the instruments is allowed under section 80C, however, an additional deduction of Rs.50,000 is allowed for NPS. Hence both the instruments are for different purposes and offer individual benefits, an investor should consider having a mix of portfolio comprising of all kinds of instruments for robust financial planning.

Related Articles

National Pension Scheme-login, scheme and benefits
Income tax deduction for NPS under section 80CCD (1B)
NPS calculator
NPS Tier 1 Account – How to Open, Interest Rate, Features, and Withdrawal

inline CTA
File your income tax for FREE in 7 minutes
Free, simple and accurate. Designed by tax experts