The National Pension Scheme or NPS is a social security scheme introduced by the government of India. This scheme allows one to build a retirement fund and also get lifelong annuity incomes. When the scheme was launched, it was meant only for the Government employees but then the scheme was made accessible to all. Today, every individual can invest in the NPS Scheme if he/she fulfils some basic eligibility criteria prescribed by the scheme.
Banks and post offices have been authorized to allow individuals to open an NPS scheme in their name. SBI, India’s largest public sector bank, also allows customers to open an SBI NPS account through it. Let’s understand the different aspects of the same and how you can invest in the National Pension Scheme in SBI.
Key Features of SBI NPS
Here are the salient features of the national pension scheme in SBI –
- This is a voluntary scheme where you can choose to contribute if you want to build up a retirement corpus
- There are two types of NPS accounts allowed – Tier I and Tier II. Tier I account is mandatory while Tier II account is voluntary
- If you invest in Tier I Account, the investments are allowed as a deduction from your taxable income. You can claim a total deduction of up to Rs.2 lakhs under Sections 80 CCD (1) and 80 CCD (1B)
- Investments in Tier II Account do not give any tax benefits. However, as per recent changes, Central Government employees can claim a deduction for investing in Tier II Account with a lock-in period of 3 years. The deduction would be allowed under Section 80C up to Rs.1.5 lakhs
- You have two asset allocation strategies to choose from – Active and Auto Choice.
- There are four types of investment funds available under the scheme – Asset Class A, C, E and G. You can choose to invest in multiple funds under the Active Choice while under the Auto Choice the investment would be done in Asset Classes E, C and G in predefined ratios
- Change of chosen asset allocation strategies is allowed
- You can choose a pension fund manager for managing your investments. SBI has its own SBI pension fund scheme which you can choose for investing your funds or you can choose from other available pension fund schemes too
- Change of pension fund managers is also allowed. You can choose to switch to the SBI pension fund scheme from another scheme if the returns are better. Change of pension fund manager is allowed once every financial year
Eligibility criteria for National Pension Scheme SBI
To invest in the NPS scheme, SBI has a set of eligibility criteria which are also applicable for NPS investments. These eligibility criteria are as follows –
- You should be aged between 18 and 65 years
- You should be a resident Indian. NRIs, PIOs, OCIs, etc. are not allowed to open an SBI NPS account
- You can be covered under other pension schemes too
- You should make a minimum investment of Rs.500 if you are opening a Tier I Account or Rs.1000 if you are opening a Tier II Account
How to Invest in SBI NPS Scheme?
For investing in the National Pension Scheme, SBI offers two modes of application – offline and online. Here are the processes for both these modes of investments –
The Pension Fund Regulatory and Development Authority (PFRDA) has allowed some banks to act as Point of Presence for NPS investments. SBI is one such bank registered with PFRDA which is a POP for NPS applications. Some of SBI’s branches act as authorized POP Service Providers and you can visit such branches to apply for the opening of the NPS account. To find a list of SBI’s branches which serve as POP-SPs, you can use the link and enter in your State and City. The authorized branches and their addresses would be shown.
Locate the nearest SBI branch and visit the branch for opening an NPS account. At the branch, you can get the NPS registration form which you should fill up and submit to apply for the opening of the NPS account. The form is also available online at this link which you can download, print, fill up and then submit at the authorized SBI branch for opening the account. Along with the form, attach your recent coloured photograph and submit your KYC documents to complete the account opening application process.
Besides submitting the registration form, you are also required to make the initial contribution to open the NPS account. To do so, avail the NPS Contribution Instruction Slip (NCIS) from the branch, fill it up and submit it with the contribution amount. The NCIS can also be downloaded online from the bank’s website using the link
SBI would, then, verify your details and open the account in your name once the verification is done.
The facility of online investment into the NPS scheme is available for the existing customers of the bank. Customers who use the net banking facility of the bank would be allowed to open the account of National Pension Scheme in SBI through online modes. For doing that, they should visit www.onlinesbi.com and log in to their net banking account using their user ID and password. On the home page of their account, under ‘Payments and Transfers’, there would be the option of ‘NPS contributions’. They would have to add a beneficiary to contribute to the NPS scheme online. The contribution would be debited from the savings account and credited to the NPS account held in the customer’s name.
After you open the NPS account in SBI, your investment would continue till 60 years of age. Then, the scheme would mature and you would be allowed to withdraw up to 60% of the accumulated corpus in a lump sum. This withdrawal would be tax-free in your hands. The remaining corpus would be used to pay annuities and such annuities would be taxable at your income tax slab rates.
So, understand the nature of NPS investments and its features and then invest in the pension scheme in SBI through the online or the offline mode.
SBI NPS – FAQs
Ques. How is NPS calculated?
Ans. Just like all other pension schemes globally, NPS uses compounding interest to calculate returns. One can use the NPS calculator available over the internet to calculate the NPS returns.
Ques. How many contributions can be made towards the NPS account?
Ans. There is no fixed lower or upper cap to the number of contributions that can be made per year. The account holder is free to manage the frequency and amounts of contributions.
Ques. Can an NRI open an NPS account?
Ans. Yes, an NRI can open an NPS account.
Ques. What are the tax benefits one can avail under NPS?
Ans. The various Tax benefits under NPS are as follows:
- Employee Contribution:
Deduction of up to 10% of the salary (basic+ DA) within overall cap of Rs.1.50 Lakh u/s 80C.
- Voluntary Contribution:
Deduction of up to Rs.50,000 u/s 80 CCD(1B) from taxable income for an additional contribution to NPS.
- Employer Contribution:
Deduction of upto 10% of the salary (Basic + DA) from the employee’s taxable income u/s 80 CCD(2). This is above the limits u/s 80C.