The Indian Overseas Bank is a public sector bank that is owned by the Indian Government. The bank was founded in 1937 and is headquartered in Chennai. The bank offers a range of banking solutions to all sectors of society, right from corporates to individuals. You can even invest in the NPS scheme through the Indian Overseas Bank by applying at the bank’s branches.
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What is the National Pension System?
The National Pension System (NPS) is a market-linked retirement saving scheme that helps you accumulate a retirement corpus and then avail yourself of lifelong pensions from the same. The scheme was launched by the Government of India and is promoted as a retirement planning tool. You can invest in the National Pension Scheme to earn market-linked returns and attractive tax benefits while at the same time accumulating an optimal retirement corpus.
The Indian Overseas Bank is recognized as a Point of Presence (POP) by the Pension Fund Regulatory and Development Authority (PFRDA). It has been authorized by the PFRDA to offer its customers the facility to invest in the NPS scheme. To subscribe to NPS IOB allows you to invest through its branches. Many of the bank’s branches are registered as POP Service Providers from where you can apply for the NPS scheme. To find out the list of branches that are POP Service Providers you can visit the official website of NPS and find out the list of such branches in your State. Use the link https://www.npscra.nsdl.co.in/pop-sp.php and enter your state and city to find the list of registered IOB branches for NPS registration.
To register and invest in IOB NPS, use the following steps –
- Visit the nearest registered branch with your KYC documents and the amount payable for the contribution
- Get the subscriber registration form at the branch depending on the type of NPS account that you are looking to open. The forms can also be downloaded using the following links –
- If you are applying as an individual – https://www.iob.in/upload/CEDocuments/CS-S1-Composite-Registration-Form.pdf
- If you are applying through the corporate model wherein the employer would contribute to the NPS scheme on your behalf – https://www.iob.in/upload/CEDocuments/CS-S1-Composite-Registration-Form.pdf
- Fill up the registration form with the complete details required under different fields mentioned in the form
- Also, fill up the NPS contribution slip stating the details of your investment
- Attach your KYC documents with the form. These documents include your age proof, identity proof and address proof. Also, submit your recent coloured photographs
- Pay the charges levied by the bank for registering you are under the NPS scheme
- Pay the amount of contribution required to open the account which you want
This completes the application process. Thereafter the Indian Overseas Bank would process your registration and open your NPS account after the details are verified. You would also be given a Permanent Retirement Account Number (PRAN) which you can use for future investments, for tracking your investments and also to shift your NPS account from one POP to another.
How does the IOB NPS account work?
Before you invest in IOB NPS, you should know how the account works. So, here’s a look –
When you invest in the NPS scheme, there are various choices which you are required to make. These choices are as follows –
Which account to open?
There are two types of NPS accounts. One is the Tier I account which is a mandatory account. So, when you subscribe to the NPS scheme, you would have to open a Tier I Account in your name. The second is the Tier II Account. This account is voluntary and you can open it if you want. So, the first choice which you make is whether to open only one account or both the NPS accounts in a composite manner.
Which investment strategy to choose?
Just like the two accounts, there are two types of investment strategies. One is the Active Choice strategy under which you can invest in a choice of funds as per your own needs and risk appetite. The second is the Auto Choice strategy under which you just choose your risk appetite. The investment would then be done in a predefined manner in equity and debt funds based on the risk appetite selected. So, depending on your investment preference, you would have to select the investment strategy.
Which pension fund manager to choose?
There are seven pension fund managers presently tasked with the job of managing your investments. You have to choose one fund manager to handle your investments.
After you make these choices, you would have to make the initial contribution. The minimum initial contribution for Tier I Account is Rs.500 and Tier II Account is Rs.1000. Thereafter, every year you should make a minimum contribution of Rs.500 towards Tier I Account and Rs.250 towards Tier II Account so that your NPS accounts remain active.
As the value of the underlying assets of the funds grows, your investment would grow. You have to make at least one contribution into the NPS account every year. The scheme runs till you are 60 years of age and can be deferred by another 10 years. On maturity, you can get up to 60% of the corpus in a lump sum and pension is then paid from the remaining corpus. On maturity too you would have to choose the pension payment mode and frequency as NPS has different pension modes.
Tax benefits of IOB NPS
The NPS scheme is a tax-effective scheme that gives you the following tax benefits –
- Tax benefits on investments under Sections 80CCD (1) and (1B). you can claim a maximum deduction of up to Rs.2 lakhs by investing in Tier I Account
- Tax benefit on the amount contributed by your employer under the employer-employee model under Section 80CCD (2). The maximum tax benefit which is available is 10% of your basic pay + dearness allowance
- Tax benefits on partial withdrawals done from Tier I Account which is allowed from the third year for specific financial needs
- Tax benefit on the lump sum amount withdrawn on maturity
If you are looking to create an earmarked retirement fund which gives attractive returns and tax benefits, invest in IOB NPS scheme. The scheme helps create a corpus and also secures lifelong incomes through pension payments allowing you to live a financially secured life even after retirement.