New Delhi: New subscribers will soon be able to open their accounts with the National Pension System (NPS) online.
The Pension Fund Regulatory and Development Authority (PFRDA), which is expecting a deluge of new subscribers after a Union budget sop that allowed extra tax deduction for investments in NPS, is planning to roll out this facility in the next few months.
Finance minister Arun Jaitley had proposed to provide a deduction of up to ₹ 50,000 over and above the savings limit of ₹ 1.5 lakh for contributions made to NPS, as part of the government’s efforts to encourage old-age savings and pension through NPS.
“We are looking at the option of online membership. Customers can access the CRA (Central Recordkeeping Agency) website for all the necessary information and then log in and open an account. They can also pay their subscriptions online," said R.V. Verma, member, PFRDA.
“The problem of KYC (know your customer) can be addressed by linking it with Aadhaar. E-KYC using Aadhaar is an acceptable proof," he said.
E-KYC service provided by the Unique Identification Authority of India (UIDAI) has been recognized as a valid document by the government for all financial services under the Prevention of Money-laundering Rules. All the subscribers have to do is authorize UIDAI to verify their identity and address to the financial institution.
“We are in the last leg. We should be able to offer this facility to subscribers before the end of this calendar year," said Verma.
At present, subscribers have to go to a bank or any other agency designated as a point of presence by PFRDA. With more than 800 million of the country’s population having Aadhaar coverage, PFRDA is hopeful that a majority of the subscribers can open NPS accounts without visiting any agency.
It could also give NPS the much-desired push. Since its launch in May 2009, NPS has been at a disadvantage vis-à-vis other competing savings schemes such as the Employees’ Provident Fund (EPF) and Public Provident Fund (PPF) because of the tax treatment of the final maturity corpus. While the NPS corpus is taxable on maturity, proceeds from EPF and PPF funds are tax-free.
Though NPS has more than 8.7 million subscribers with total assets under management of at least ₹ 80,800 crore, the majority of subscribers are central and state government employees for whom it is mandatory to invest in the scheme.
Suresh Sadagopan, a Mumbai-based financial planner, said the option of opening an account online is a subscriber-friendly and well-timed move.
“NPS is a good product, the tax treatment of the final maturity amount being the only big disadvantage. Though the sop announced in the Union budget is not enough to nullify the disadvantage compared with similar products, we should see more people investing in the scheme this year," he said.