 "NPS account: Why you should make regular contributions, keep it active")
Subscribers of the National Pension System (NPS), which provides financial security post-retirement, may find their accounts frozen due to missed minimum contributions or compliance issues. Understanding what happens when your NPS account is frozen and how to reactivate it is crucial for maintaining your retirement savings.
What is the minimum contribution to keep an NPS account active?
To maintain an active NPS Tier-I account, a minimum contribution of Rs 1,000 must be made in a financial year. Failure to meet the requirement will result in the account being frozen. However, there is no minimum balance requirement for Tier-II accounts.
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Consequences of not contributing the minimum amount
Account frozen
When a subscriber fails to meet minimum contribution requirements, the most immediate impact is the freezing or deactivation of the account. This means that while the existing investments continue to generate returns, the subscriber loses the ability to perform any transactions or make additional contributions until the account is reactivated.
Penalty
When an NPS account is frozen due to non-compliance with minimum contribution requirements or other issues, subscribers must pay a Rs 100 penalty along with any overdue contributions to reactivate their accounts.
Loss of tax benefits
A frozen NPS account can also lead to a loss of valuable tax benefits associated with NPS contributions. Contributions made by NPS are tax benefits under Section 80C and 80CCD (1B).
Risk of deactivation
If the account remains frozen for an extended period without any contributions, there is a risk of permanent deactivation. This would result in the loss of accumulated funds in your NPS account, putting at risk your retirement savings and future financial stability. Therefore, it is essential to act promptly if you find your account has been frozen.
Impact on compounding effect
The long-term financial impact of skipping even a single year of contributions can affect your retirement goals. Maintaining consistent investments in the NPS is essential for building a robust retirement corpus. Missing contributions could result in reductions in the benefits you receive upon withdrawal.
How to unfreeze NPS account
Go to the official NPS website at https://cra-nsdl.com.
Click on the ‘NPS Login’ button and enter your PRAN (Permanent Retirement Account Number) along with your password. If you have forgotten your password, use the ‘Forgot Password’ option to reset it.
Once logged in, go to the ‘Contribution’ tab.
Under the ‘Contribution’ tab, select the option to reactivate your account.
Ensure you know the minimum annual contribution, which is currently Rs 1,000 per financial year.
Pay the Rs.100 reactivation fee.
Enter the amount and proceed to payment via net banking, debit card, or credit card.
Check all payment details, including the amount and payment method.
Proceed with the payment using OTP authentication and CAPTCHA. Once successful, a confirmation message will be displayed.
After the payment, download the transaction acknowledgment receipt for your records.
Your NPS account will be reactivated within a few hours or a couple of days, and you will receive a confirmation via email and SMS.