NPS Investment with Zerodha Coin| How to invest, Charges, Taxation

Can we invest in NPS through Zerodha? Yes, on March 13, 2024, Zerodha as a Point of Presence (PoP) started offering NPS (National Pension Scheme) retirement products for its customers. Zerodha users can now invest in NPS on Zerodha Coin and plan a happy retirement. Are you someone who wants to invest in NPS with Zerodha? Here is a complete guide for you.

Read on to know how to open an NPS account with Zerodha, what are the NPS charges, how to invest and withdraw money in NPS with Zerodha Coin and what are the tax benefits of NPS investments.

What is NPS or National Pension Scheme?

The acronym NPS stands for National Pension Scheme. It is a retirement pension planning product by the central government and the PFRDA (Pension Fund Regulatory and Development Authority).

Under this scheme, an individual can contribute a fixed amount to their pension account at regular intervals to prepare for retirement. The NPS can invest in various asset classes such as equities, corporate bonds, government securities and alternative asset classes. After retirement, the NPS participant can withdraw a fixed amount as a lump sum and the remaining amount as a monthly pension.

Those who regularly contribute a fixed amount to the NPS account can better prepare for their financial needs in retirement.

Earlier, the NPS was only available to central government employees, but now it is open to all Indian citizens. It is a voluntary scheme and any public or private sector employee who wants to plan for retirement can contribute to the NPS.

Among the numerous retirement products such as PPF, Life insurance pension plans, Atal Pension Yojana, NPS is proving to be the most effective retirement solution which offer higher returns than other retirement products and also offers tax benefits of upto Rs 1.5 lakh.

Who can invest in NPS with Zerodha?

Any individual resident account holder in Zerodha who are below 65 years of age can invest in NPS and prepare for their retirement.

Currently, NRIs, joint account holders and non-individual account holders such as HUF, corporates or partnerships cannot invest in NPS on Zerodha Coin.

Zerodha NPS Account Type

NPS has two types of accounts, a Tier 1 account and a Tier II account.

The Tier 1 NPS account is a mandatory retirement account. Any Indian citizen below the age limit of 65 years can open a Tier 1 NPS account with Zerodha. All contributions made into the Tier 1 NPS account are locked until the subscriber attains the age of 60 years.

The Tier II NPS account is a voluntary retirement savings account that can only be opened if you have an active Tier 1 account. Subscribers can invest or withdraw money from the Tier-II account at any time without any lock-in period. Zerodha does not offer a Tier II account for the NPS.

Investment in NPS is not held in Zerodha demat account thus, there is no maintenance fee charged to held NPS investment. Zerodha customers can track investment in NPS on the coin platform.

How to invest in NPS with Zerodha Coin?

Zerodha users can subscribe to the NPS scheme on its Coin platform. Follow below steps to invest in NPS with Zerodha Coin;

• Log in to the Zerodha coin web or mobile app.
• On the dashboard, click on NPS.
• Select I Agree checkbox.
• Enter the place of birth.
• Enter the parent's name you want to be on your PRAN (Permanent Retirement Account Number).
• Enter your marital status and spouse’s name.
• Enter heard about NPS from? And occupation.
• Add nominee’s name, date of birth, and percentage of allocation and tap on continue.
• Select your choice of pension fund house.
• Select your investment choice as Auto or Active.
• Select an investment plan as Aggressive, moderate or conservative.
• The investment plan decides your asset allocation into equity, corporate bonds, and government securities.
• Enter the investment amount and tap on continue.
• Enter the 6-digit OTP and click on verify.
• Complete the payment using UPI or net banking.
• Upon successful payment, your investment is NPS is done.

Before subscribing to NPS scheme in Zerodha, keep in mind;

• To invest in NPS, it is mandatory to add a nominee to your Zerodha account.
• Bank details have to be verified to open a NPS account. To do so, create a ticket and attach a latest 6 months bank statement or a cancelled cheque of the primary bank account.

Note: When you place an order to invest in the NPS scheme, Zerodha will transfer funds to the trustee banks by 6 PM on the same day who will reconcile funds and allocate NPS units as per NAV applicable.

Zerodha NPS Investment Platform

Zerodha Coin is the platform to invest in NPS systems. Any Zerodha individual resident account holder can subscribe to NPS on Coin.

• Zerodha Coin Web: Customers can log in to Zerodha Kite and access the Coin website. It is a browser-friendly platform that runs conveniently in any browser such as Chrome, Internet Explorer, Safari, etc.
• Zerodha Coin App: One can also invest in NPS schemes online through the Coin mobile app. The app is available on all Android and iOS devices.

Zerodha NPS Withdrawal Rules and Regulations

A subscriber cannot withdraw the money invested in the NPS before reaching the retirement age of 60 years. Read the PFRDA rules for the withdrawal of money from the NPS account.

1. At maturity when NPS subscriber reaches 60 years

• The maturity term of the NPS account is 60 years. Once an NPS participant reaches the age of 60, 60% of the corpus is withdrawable as lumpsum, and the remaining 40% in the form of an annuity. The annuity provides the NPS recipient with a regular payment to cover expenses after retirement.
• If the NPS retirement corpus is less than Rs 5 lakhs, the subscriber can withdraw 100% or the entire NPS capital as lump sum.

2. Zerodha NPS Partial Withdrawal

Under certain conditions, a partial withdrawal from the NPS pension account is also possible. If you have completed 3 years as an NPS subscriber, you can partially withdraw the money from the pension account for certain purposes including;

• Children’s education
• Children’s marriage
• Purchase and construction of the first house
• Medical emergency for specified illnesses such as cancer, kidney failure, etc.
• For medical and incidental expenses arising from disabilities
• For skill development of NPS subscriber
• To establish a new venture or startup by NPS account holder

An NPS holder can withdraw upto 25% of the total deposits made to the NPS account. Suppose you have been an NPS subscriber for at least 3 years and have invested a total of 5 lakhs in your retirement account and your balance has grown to 7 lakhs.

As per PFRDA rules, you can withdraw 25% of the total contribution of 5 lakh, i.e. Rs 1,25,000. The balance of Rs 7 lakh is not eligible for partial withdrawal.

Partial withdrawal from the NPS account is possible three times during the NPS tenure. Also, there must be an interval of 5 years between two partial withdrawals. In subsequent withdrawals, 25% of the additional contributions made after the previous withdrawal is allowed.

3. Zerodha NPS Premature exit before 60 years

Early or premature exit or voluntary retirement before the age of 60 years is also possible under several conditions;

• The subscriber must have completed 5 years of NPS subscription.
• The subscriber must purchase an annuity for at least 80% of the accumulated pension capital and 20% of the capital is paid out as a lump sum.
• If the total annuity capital is 2.5 lakhs or less, the entire amount can be withdrawn as a lump sum.

4. Exit upon NPS Subscriber’s death

• If the NPS subscriber dies, the entire capital (100%) is paid to the nominee or legal heirs if the total capital is up to 5 lakhs. However, the nominee has the option to opt for a pension plan.
• If the NPS balance is more than Rs 5 lakhs, 20% is paid as a lump sum, and 80% of the pension wealth are used to buy an annuity.

Zerodha NPS Taxation

• NPS is a tax-exempt pension product. Yes, investment in the NPS offers tax benefits of upto Rs 1.5 lakhs under Section 80C.
• There is also an additional tax deduction of Rs 50,000 is offered under Section 80CCD. So, in total, NPS subscribers can claim a tax deduction of upto Rs 2 lakhs for NPS investments in a year.
• On retirement, you can get 60% of the total retirement capital as a lump sum, which is tax-free. The remaining 40% is paid out as a pension or annuity to cover regular expenses post-retirement.
• A partial withdrawal of 25% of the total NPS investment is also tax-free.