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The National Pension System is a retirement benefits scheme that offers tax saving. This government scheme is a retirement scheme regulated by Pension Fund Regulatory and Development Authority (PFRDA). The returns from the National Pension System are market-linked. Hence its performance depends on the performance of underlying assets. This article covers ICICI NPS account, its features, benefits and how to open an NPS account online in ICICI bank in detail.

What is an NPS Account?

National Pension System is a Government of India scheme that encourages Indian citizens to save towards their retirement. This scheme also offers tax benefits. This government scheme is a retirement scheme regulated by Pension Fund Regulatory and Development Authority (PFRDA). Indian citizens within the age group of 18 and 65 years can open the Nation Pension System account.

The National Pension System is a long term investment scheme, and it matures when the investor turns 60. The investor has an option to extend the term until they turn 70. Hence the investment is locked-in until the scheme matures. Returns from the National Pension Scheme are not guaranteed; as they are market-linked. In other words, the NPS scheme invests in marketable securities, and their performance affects the return from it.

Upon maturity, the investor is free to withdraw 60% of the accumulated retirement corpus as a lump sum, which is completely tax-free. The rest 40% of the corpus should be used to purchase an annuity scheme. An annuity scheme pays a regular pension to the subscriber for a lifetime. The income from the annuity scheme is taxable as per the investor’s respective income tax slab rates. One can use an NPS calculator to estimate the returns from an NPS investment. Scripbox’s NPS calculator estimates the expected return from NPS upon withdrawal and also the annuity scheme.

Subscribers can partially withdraw their investments in the National Pension Scheme after completion of 3 years of the account opening. Investors can withdraw 25% of the accumulated amount for three times during the tenure of the investment.

Investment in Tier I NPS accounts qualify for tax saving under Section 80C and 80CCD(1b). Investors can avail up to INR 2 lakhs by investing in NPS. The National Pension Scheme account Tier II has no such benefits. However, government employees who invest in Tier II accounts can claim deduction up to INR 1.5 lakhs under Section 80C. But this benefit is only available when the investor agrees to a lock-in of 3 years on the investment.

Features of ICICI NPS Account

ICICI is a Point of Presence Service Provider for the National Pension Scheme. Following are the features of ICICI NPS Account:

  • The objective of an NPS scheme is to provide social security for all Indians.
  • PFRDA regulates the National Pension Scheme, with transparent investment norms, frequent monitoring and performance review of fund managers by the NPS Trust.
  • One can open an ICICI NPS account at any ICICI bank branch.

Tier i account and Tier ii account

  • ICICI Tier i account is a mandatory account with tax benefits.
  • NPS Tier ii account is an optional investment account and offers no tax benefits. Also, one can withdraw their investments from the scheme at any time.
  • A Minimum amount at the time of opening the account is INR 500 for ICICI NPS Tier i account.
  • For Tier ii account, a minimum contribution while opening the ICICI NPS account is INR 1,000.
  • The minimum investment for ICICI Tier i account during a year is INR 1,000.
  • For Tier ii accounts, there is no restriction on the minimum contribution.

Flexibility

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

Investment Type and Withdrawals

Investors of ICICI NPS can choose between the following three forms of investment:

  • High risk and high returns: Majority investments in equities.
  • Medium risk and medium returns: Majority investments in debt instruments.
  • Low risk and low returns: Investing only in debt securities.

National Pension Scheme ICICI account holders can choose from the following two forms of investment:

  • Active Choice: Investors can choose between the various asset classes.
  • Auto Choice: This is a default option that invests funds as per the ICICI Bank subscriber’ age.
  • Also, the National Pension Scheme ICICI account is portable across geographies and jobs.

The account holders of ICICI NPS can withdraw the entire pension corpus as a lump sum if the amount is less than INR 2,00,000 when they turn 60 years old.

ICICI bank permits partial withdrawals up to 25% for Tier 1 accounts. However, only for specific purposes such as major illness, buying a home, or child’s education.

Return and Cost

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

NPS account and maintenance

One can open ICICI NPS account online or offline:

Online: https://www.icicibank.com/Personal-Banking/account-deposit/pension-schemes/national-pension-system/features.page?#toptitle

Offline: PFRDA has appointed ICICI Bank to act as one of the Point of Presence (POP) for the NPS. Hence one can visit the nearest ICICI bank branch to invest in NPS.

Furthermore, subscribers have online access to the ICICI NPS account through Web and Tele applications to CRA.

Taxation

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

Eligibility For Opening ICICI Bank NPS Account

Following is the eligibility criteria for opening ICICI National Pension Scheme Account:

  • Indian citizens and Non-Resident Indians between the age of 18 years and 65 years can open ICICI bank NPS accounts. However, Persons of Indian Origin and Overseas Citizen of India holders cannot open.
  • Being KYC compliant is mandatory for opening an ICICI bank NPS Tier 1 account. Following are the documents for KYC: Address proof, Photo ID proof, date of birth proof, and application form. 
  • The subscriber has to make at least one contribution per year to keep their ICICI bank NPS account active.
  • ICICI bank Tier 2 account can be opened only if the subscriber has an active ICICI NPS Tier 1 account. Also, NRIs cannot open the Tier 2 account.

Documents Required To Open ICICI NPS Account

Following are the documents that an Indian citizen has to submit to open NPS in ICICI bank:

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

For NRIs, the following are the documents to open NPS in ICICI bank:

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

How to Open NPS Account in ICICI a Step-By-Step Guide?

PFRDA has appointed ICICI Bank to act as one of the Point of Presence (POP) for the NPS. To know the procedure of ICICI Bank NPS account opening, one has to follow the steps below:

  • For opening an National Pension Scheme account with ICICI bank, one needs to have an ICICI bank account, PAN Card and Aadhar Card.
  • The first step is to log in to ICICI net banking using your savings account details and enrol for the NPS scheme in the ‘Service Request’ section.
  • Then one has to authenticate the account with Aadhar OTP. The Aadhar must be linked to the phone number. For this, the Aadhar must be linked to the mobile number.
  • Next, fill the National Pension Scheme registration form with all necessary details. Choose the fund manager from the available list of eight fund managers. One had to also choose the mode of investment. There are two choices, active and auto mode. The subscribers also need to fill in the nominee details. The nominee name, date of birth and address has to be filled in the registration form.
  • Finally, enter the Aadhar OTP and upload a picture of the signature. This completes the registration process.
  • Now the service request has been generated, and it will take a day or two for the scheme activation. Upon activation, the Permanent Retirement Account Number (PRAN) is generated.
  • Now, the investor can log in to net banking to make the initial contribution (a minimum of INR 1,000). They can also add NPS as a biller, so the subsequent contributions are automated.

Benefits of An NPS Account

Following are benefits of having ICICI National Pension schemes:

Option to choose and change fund manager

ICICI is a Point of Presence Service Provider for NPS. Under this scheme, an investor can choose the fund manager. Upon doing so, all the funds contributed by the subscribers will be invested by that fund manager. PFRDA has provided a list of eight fund managers under NPS, and investors can choose from anyone from this list. If the investor doesn’t choose a fund manager, then by default the scheme chooses SBI as the fund manager. At any point, if the investor is not happy with the performance of the fund manager, they can change the fund manager.

Choice of investment mode

The NPS scheme allows investors to choose the mode of investment. It offers two modes of investment, namely, active and auto choice. Under the active choice, an investor can decide the portfolio’s asset class mix. In auto mode, the investor’s asset class mix is predetermined and depends on their age. One can also switch between investment modes during the tenure of the NPS scheme.

Partial withdrawals

Though investment in this scheme matures when the subscriber turns 60, they can partially withdraw their investments after completion of 3 years of opening the account. Investors can withdraw 25% of the accumulated retirement corpus for three times during the tenure of the investment. Also, there has to be at least a five years gap between consecutive withdrawals.

Taxation

Investment in Tier I accounts qualifies for tax saving under Section 80C and 80CCD(1b). Investors can avail up to INR 2 lakhs by investing in NPS. NPS Tier II account has no such benefits. However, government employees who invest in Tier II accounts can claim deduction up to INR 1.5 lakhs under Section 80C. But this benefit is only available when the investor agrees to a lock-in of 3 years on the investment. 

Also, upon maturity, the investor is free to withdraw a maximum 60% of the accumulated wealth as a lump sum, which is completely tax-free. A minimum of 40% of the accumulated deposits should be used to purchase an annuity scheme. An annuity scheme pays a regular pension to the subscriber for a lifetime. The income from the annuity scheme is taxable as per the investor’s respective income tax slab rates in the year of receipt.

Conclusion

NPS is a retirement benefit scheme that offers tax benefits. It has exposure to asset classes like equity and debt. However, NPS has a high lock in period making it unattractive to many investors. Hence investors can consider mutual funds. Mutual funds are investments that invest in equity, debt and government securities and have no or minimum lock-in. Also, some mutual funds offer tax benefits, for example ELSS funds. A ELSS mutual fund qualifies for  tax deduction under up to INR 1.5 lakhs under Section 80C of the Income Tax Act, 1961. Mutual funds are investments that are highly liquid and offer better returns. Therefore an investor can consider having it in their personal investment portfolio.