How to Apply for PRAN in Tier 1 and Tier 2 NPS Accounts
What is PRAN?
PRAN, or Permanent Retirement Account Number, is a unique 12-digit identification number assigned to subscribers of the NPS scheme. It serves as a unique identifier for all transactions undertaken in the NPS account. Whether you choose to invest in the Tier 1, Tier 2, or both accounts, obtaining a PRAN is a mandatory process when you opt for the National Pension System.
Understanding Tier 1 and Tier 2 Accounts
Before applying for a PRAN card online, it's essential to understand the distinction between Tier 1 and Tier 2 accounts:
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Tier 1 Account: This is the primary retirement account under the NPS with tax benefits and restrictions on withdrawals. Contributions in Tier 1 offer tax deductions under Section 80CCD(1) and 80CCD(1B) of the Income Tax Act, allowing up to INR 2 lakh deduction per annum.
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Tier 2 Account: This is a voluntary savings account with greater liquidity and no tax incentives. Withdrawals from Tier 2 accounts can be made freely without restrictions.
How to Apply for PRAN Card Online
To apply for a PRAN card online, follow these steps:
Step 1: Eligibility
Before applying, ensure you are eligible to open an NPS account. You must be an Indian citizen aged between 18 and 65 years.
Step 2: KYC Compliance
Ensure that you have completed your Know Your Customer (KYC) procedures before applying. KYC documents include proof of identity and address, such as Aadhaar, PAN card, Voter ID, or Passport.
Step 3: Register on eNPS Portal
Visit the official eNPS website provided by the Pension Fund Regulatory and Development Authority (PFRDA). The website is user-friendly and provides step-by-step guidance to complete the registration process online. Here's how you start:
Select “Registration” and then “New Registration.”
Choose the appropriate registration option, such as Aadhaar-based or PAN-based registration. Using Aadhaar simplifies the process due to e-Verification.
Step 4: Providing Details
After selecting the registration option, fill in your personal, contact, and bank details. Ensure all information is correct to avoid any discrepancies during PRAN allotment.
Step 5: Choosing Scheme Preference
Decide the type of account you want to open Tier 1, Tier 2, or both. Declare your investment choice by selecting the fund manager and allocation percentage across asset classes (Equity, Corporate Bonds, and Government Bonds).
Step 6: Initial Contribution
A minimum initial contribution of INR 500 for Tier 1 or INR 1,000 for Tier 2 is required while opening the account. Complete the payment through net banking, credit/debit cards, or UPI.
Step 7: Upload Documents
Verify your details and upload the required documentation, including a scanned signature and a passport-sized photograph. Recheck all inputs for accuracy.
Step 8: PRAN Generation
Once the application and contribution are submitted, the PRAN is generated. This number is sent to the registered mobile and email ID. Subsequently, within a few days, the PRAN card is dispatched to your registered address.
Managing Tier 1 and Tier 2 NPS Accounts
Tier 1 Account Maintenance Costs: Maintaining a Tier 1 account requires an annual fee of INR 50. Transaction fees of 0.25% are levied on contributions, with a minimum of INR 20 per contribution.
Tier 2 Account Charges: The Tier 2 account does not have any annual maintenance charges, but similar transaction fees apply.
Tax Implications
Tier 1 Account: Subscribers can claim deductions up to INR 1.5 lakh under Section 80CCD(1) and an additional INR 50,000 under Section 80CCD(1B).
Tier 2 Account: No tax benefits apply. Withdrawals from Tier 2 are taxable as per the applicable income tax rates.
Disclaimer
Investors must evaluate the details and terms before participating in the NPS scheme, considering that the Indian financial market inherently comprises risks. Meticulous evaluation of pros and cons is imperative before making any financial commitments.
Summary
Applying for a PRAN card online requires understanding the NPS framework and selecting the appropriate type of account – Tier 1 or Tier 2. It is crucial to have completed KYC compliance, followed by carefully filling in details on the eNPS portal. After selecting scheme preferences and making an initial contribution, the PRAN is allocated, facilitating seamless participation in NPS. Remember, Tier 1 offers tax benefits, whereas Tier 2 provides liquidity. Subscribers need to consider maintenance charges, taxation implications, and other transactional costs associated with these accounts. Importantly, analyzing personal financial goals and market conditions should precede making any investment-related decisions in India.
Disclaimer: The content provided in this article is for informational purposes only and does not constitute financial advice. Users should consider their financial circumstances and consult financial advisors if necessary before making investment decisions.
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