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The National Pension Scheme (NPS) is a retirement scheme launched by the Government of India that offers tax saving. Pension Fund Regulatory and Development Authority (PFRDA) regulates this investment scheme. The returns from NPS are market-linked, hence not guaranteed. The scheme’s performance depends on the performance of assets that the scheme invests. This article covers the Axis Bank NPS account, its features, benefits and account opening process in detail.

What is an NPS Account?

The National Pension System is a tax-saving retirement benefits scheme launched by the Indian Government. Pension Fund Regulatory and Development Authority (PFRDA) regulates this retirement scheme. The is a long term scheme that matures when the investor’s age is 60. The investor has an option to extend the scheme for another ten years.

The minimum contribution for opening an NPS account is INR 1,000. The investor has to make at least one contribution per year to keep the account active. The returns from NPS are market-linked. Hence the pension amount that one receives will depend on the performance of the underlying assets. Upon maturity, the investor can withdraw 60% of the accumulated amount in lump sum, completely tax-free. The rest 40% has to be used to purchase an annuity scheme. An annuity scheme pays lifelong pension regularly. The income from the annuity scheme is taxable in the year of receipt.

There are two types of accounts; namely, Tier I and Tier II accounts. A Tier I account is a pension account. And the Tier II account is an investment account, which is a voluntary account. To have a Tier 2 account, one needs to have a Tier 1 account. Tier 1 account has restrictions on withdrawals. In contrast, a Tier 2 account has no such restrictions.

NPS Tier 1 account allows partial withdrawals of up to 25% of the corpus after three years of account opening. The investor can withdraw partially three times during the tenure of the scheme. Also, there must be a gap of 5 years between two consecutive withdrawals.

Taxation

Contributions made in Tier 1 National Pension System accounts qualify for tax saving under Section 80C and Section 80CCD(1b). Investors can claim up to INR 2 lakhs as a tax deduction. NPS Tier II accounts have no such benefits except for public sector employees. A public employee sector can avail a tax benefit of INR 1.5 lakhs under Section 80C of the Income Tax Act and have to accept a mandatory lock-in of 3 years.

Features of Axis Bank NPS Account

Following are the features of Axis Bank NPS Account:

The main objective of the NPS scheme is to provide social security for all Indians. One can open a NPS in Axis Bank at any of the Axis bank branches.

Tier 1 and Tier 2 accounts

  • Axis bank Tier 1 pension account is a mandatory account with tax deductions.
  • NPS Tier 2 account is an optional investment account that offers no tax benefits. Also, one can withdraw their Axis bank NPS corpus from the scheme at any time.
  • For opening a NPS account with this bank, one has to make a minimum of INR 500 for Tier 1 account.
  • For a Tier 2 account, the minimum contribution is INR 1,000.
  • The minimum contribution for Axis bank Tier 1 account during a year is INR 1,000.
  • For Tier 2 accounts, there is no restriction on the minimum amount contribution per year.

Flexibility

  • Axis bank NPS investors have the flexibility to choose their Pension Fund Manager (PFM). Furthermore, Axis bank subscribers can also change their PFM once in a financial year.
  • Axis bank offers customised investment options with the flexibility to choose between different asset classes such as government securities, corporate bonds, and equity. Also, the Axis bank NPS subscribers can change their asset allocation percentages twice in a financial year.

Investment Type

  • Investors of Axis bank NPS scheme can choose between the following three forms of investments:
  • High risk and high return: Majority of the contributions made are in equities.
  • Medium risk and medium return: Majority of the investments in debt instruments.
  • Low risk and low return: Investing only across debt securities.
  • National Pension Scheme Axis account holders can choose from the following two forms of investment:
  • Active Choice: The funds are invested as per investors choice.
  • Auto Choice: This is a default option that invests funds as per the Axis Bank subscriber’ age.
  • Also, Axis NPS account is portable across geographies and jobs.

Return and Cost

  • Axis bank NPS is a NAV based product that has the capacity to offer attractive market-linked returns.
  • The Axis bank NPS account is a low-cost product with a management fee of 0.01%.

Withdrawals

  • Axis bank NPS account holders can withdraw the entire pension corpus if the amount is less than INR 2,00,000 when they turn 60 years old.
  • Axis bank permits partial withdrawals up to 25% for Tier 1 accounts. However, only for specific purposes.

NPS account opening and maintenance

  • One can open Axis NPS account online or offline at any branch:
  • Online: https://cra.kfintech.com/POPONLINE/POPAuthenticate
  • Offline: Visit the nearest Axis bank branch
  • Furthermore, subscribers have online access to the Axis bank NPS account through Web and Tele applications to CRA.

Taxation

  • 60% of the total wealth under the NPS scheme is tax-free on withdrawal.
  • Contributions up to INR 1,50,000 are eligible for tax exemption under Section 80C. An additional contribution of INR 50,000 towards Axis NPS also qualifies for tax exemption under Section 80CCD (1B) of the Income Tax Act, 1961.
  • Over and above this, Employer’s contribution up to 10% of Basic plus Dearness allowance (DA) is deducted from taxable income of the employee under Section 80 CCD (2), and Employer under Section 36 (i) (iv-a) of IT Act 1961 without any ceiling on the amount.

Eligibility For Opening Axis NPS Account

Following is the eligibility criteria for Axis Bank NPS Account:

  • Indian citizens and Non-Resident Indians (NRI) between the ages of 18 and 65 can open the Axis NPS account. However, Persons of Indian Origin (PIO) and Overseas Citizen of India (OCI) holders cannot open.
  • The subscriber has to be KYC compliant and is mandatory for opening Axis NPS Tier 1 accounts. Following are the documents for KYC: Photo ID proof, Address proof, date of birth proof, and application form. 
  • The subscriber has to make at least one contribution per year to keep their Axis Bank National Pension Scheme account active.
  • One can open the Axis NPS Tier 2 account only if the subscriber has a Axis bank NPS Tier 1 account. Also, NRIs are not eligible to invest in the Tier 2 account.
  • Also, the applicant should not have an already existing NPS account.

Documents Required To Open Axis NPS Account

Following are the documents that an Indian citizen has to submit to invest in Axis National Pension System Account:

  • PAN Card and Aadhaar Card – linked to the applicant’s Axis account.
  • Passport size colour photo
  • Address proof
  • Scanned image of the NPS subscriber’s signature.

For NRIs, the following are the documents required for this retirement scheme:

  • Filled registration form
  • Photocopy of the passport, including the following: first, last and visa page.
  • Address proof, in case the current address is different from the one in the passport.
  • Passport size colour photo

How to Open NPS Account in Axis Bank? Step-By-Step Guide?

All Axis Bank branches are authorized for NPS. Hence it is a Point of Presence POP – SP. To invest in a National Pension Scheme account with Axis, one has to follow the steps below:

  • The perquisites for opening an Axis Bank NPS account are PAN Card, Aadhar Card, and Axis savings account with internet banking facilities.
  • Firstly, visit Axis Bank website, https://www.axisbank.com/. Under the ‘Apply Now’ section, choose NPS.
  • Upon doing so, the page will be redirected to Karvy Computershare Private Limited website.
  • One has to fill in all necessary details like PAN card number and Aadhar Card number on this website.
  • In the online form, one has to fill in details of the fund manager, mode of investment and nominee details. Nominee details like name, date of birth, etc have to be filled.
  • Then, one has to upload the KYC documents to make the initial contribution online using a debit card or internet banking.
  • Once the data is verified, PRAN (Permanent Retirement Account Number) is created, and the Axis Bank National Pension Scheme account will be activated. 
  • All the contributions later can be made by adding NPS as a biller in the Axis Bank internet banking portal. Any changes to be made to the investor details, can be done though internet banking.

Benefits of An NPS Account

Following are advantages of having an Axis Bank National Pension System account:

Choice of the fund manager

Under NPS, a subscriber chooses a fund manager from available pension fund managers. Moreover, a subscriber also has an option to change the fund manager in case the performance of the existing fund manager is not satisfactory.

Choice of the mode of investment

Investors of NPS have a choice on the asset mix. There are two modes of investment under NPS. They are active mode and auto mode. Under active mode, can choose their asset mix. On the other hand, under auto mode, the asset allocation of the funds is done based on the investor’s age.

Partial withdrawals

NPS matures when the investor turns 60 years, and the investment is locked-in until then. However, NPS Tier I account allows partial withdrawals of up to 25% of the corpus after three years of account opening. The investor can withdraw partially three times during the tenure of the investment. Also, there must be a gap of 5 years between two consecutive withdrawals.

Taxation under National Pension System

Investment in Tier I NPS accounts qualifies for tax deduction under Section 80C and Section 80CCD(1b). Investors can claim up to INR 2 lakhs as a tax deduction. NPS Tier II accounts have no such benefits except for public sector employees. They can avail tax benefits of INR 1.5 lakhs under Section 80C and have to accept a mandatory lock-in of 3 years.