When you are investing, the cost of investing may impact your returns i.e. if the cost of investing is too high, it will compromise your returns. We have already seen how a small intermediary commission in regular plans of mutual funds can affect performance as compared to direct plans of MF schemes.
National Pension scheme (NPS) has attracted a lot of attention in the latest few years owing to exclusive tax benefits under Section 80CCD(1B). Union Budget 2016 added a sweetener to the maturity corpus providing exemption up to 40% of the accumulated corpus
Low fund management charges in NPS have been touted as NPS’s biggest strength. Can’t question that. However, fund management charge is the not only cost that you incur when you invest in NPS. There are many other charges. In this post, let’s look at the cost/charges that are involved when you invest in NPS.
List of NPS Charges
Applicable Charges in case of eNPS
PFRDA has introduced eNPS platform to opening NPS account online and make contributions online.
You can go to eNPS portal and open NPS account in the two ways.
- Using Aadhaar details
- Using a combination of bank account details and PAN
Do note if you open NPS account through eNPS, CRA charges will still be applicable. But you may save on PoP charges. Go through the following post for more on this topic.
Must Read: How to open NPS account online using Aadhaar Card?
Subsequently, you can make contributions online.
Even those subscribers who had opened account through a Point of Presence can make further contributions through eNPS.
Service Charges for online Contribution through eNPS
PoP charges for contribution are not applicable for contributions through eNPS.
However, you will have to incur a service charge of 0.05% of the contribution amount if you make contribution through eNPS. This service charge is subject to a minimum of Rs 5 and a maximum of Rs 5,000 per contribution
This is in order to incentivize PoPs which played a part in initial on boarding of subscriber.
If you had opened NPS account through a Point of presence and make contribution through eNPS, then this charge shall be applicable. This service charge is also applicable if you had opened account through eNPS portal using PAN and bank account details.
However, if you have opened NPS account through eNPS portal using your Aadhaar card, then such service charge shall not be applicable.
This charge is not applicable if you are making contribution through a PoP.
Book Suggestion: Retire Rich, Invest Rs 40 a day (P.V.Subramanyam)
Payment Gateway Charges for eNPS
Through eNPS portal, you can contribute to your NPS account online. However, you will have to pay payment gateway charges for online payments. If you are making a payment through net banking, then the charge is only Rs 0.6 per transaction. However, if you plan to make payment through debit or credit card, the charge is steep at 0.8% and 0.9% of the contribution amount respectively. The payment gateway charges are subject to revision.
Hence, if you are contributing through eNPS, make payment through net banking. Otherwise, you are much better off making contribution through a Point of Presence.
NPS Charges for NRIs
The charges for NRI, especially PoP charges are a bit different. Charges for other intermediaries such as CRA, PFM etc are same as for residents. The charges depend on whether account is getting serviced in India or abroad. You can read about the charges in this PFRDA circular.
By the way, even NRIs can open NPS account through eNPS portal.
PersonalFinancePlan Take
Proponents of NPS point to the low fund management charges (investment management fee) of NPS. The fund management charges are actually quite low as compared to even direct plans of MF schemes. Moreover, fund management fee is on a continuous basis (and not one time). NPS is clearly ahead on this front.
However, ancillary charges can be extremely high especially if you are investing small amounts.
There are floors on charges. For instance, if you are making contribution through PoP, you pay contribution charge of 0.25% subject to a minimum of Rs 25 (plus service tax). If you are making a contribution of Rs 1,000, contribution charge is 2.5% (excluding service tax) of the investment amount. For a contribution amount of Rs 5,000, the contribution charge is 0.5% of the investment amount.
And this is before CRA charge of Rs 4 per contribution.
For all the hype about low cost structure of NPS, it can be very expensive product for someone who is contributing small amounts. Fortunately, these charges are on per contribution basis (and not on continuous basis).
Do note this is only for subscribers under All Citizen model. PoP charges are not applicable for Government NPS subscribers.
Personally, I do not see any reason why you should be investing more than Rs 50,000 per financial year in NPS (unless your contributions are mandatory). Rs 50,000 is the maximum benefit under Section 80CCD (1B) for investment in NPS.
If you are planning to contribute to NPS, you must:
- Consider these cost floors in mind. You may be better off investing in 1 or 2 installments rather than on a monthly basis.
- Make contributions through eNPS portal.
- Use net banking to make the payment.
And if you want to contribute to NPS and have not yet opened your account, open it through eNPS portal using your Aadhaar card.
Additional Links
PFRDA circular for NPS Charges for NRIs
PFRDA circular for Introduction of service for e-NPS
NPS charges FAQ on NSDL website
Book Suggestion: Can I Retire Yet? How to make the biggest Financial Decision of the Rest of your life? (Darrow Kirkpatrick)
32 thoughts on “What are the various charges incurred while investing in NPS?”
Very good and informative post. I was looking for these kind of details.
You are welcome!!! Please share with your friends too.
1) Under the heading of “Service Charges for online Contribution through eNPS:, you have written “This charge is not applicable if you are making contribution through a PoP”. As i know, it should be “applicable” if making contribution through “PoP”. Pl confirm.
2) Which is the case with which I avoid “fund manager” & “custodian fee”
Hi,
1. Service charge is applicable when you are not investing through PoP (but through eNPS). If you were investing through PoP, PoP will automatically get a percentage of your contribution (therefore no need of service charge)
2. You can’t avoid fund manager and custodian fee.
Hope this clarifies your query.
Hello Sir,
Can you help me with below questions
1) which would be the best option from the point of minimizing the annual charges for NPS
a) Joining eNPS through CRA using Aadhar (and paying annual maintenance cost + transaction cost)
b) Joining NPS through POP
2) If I am joining NPS through POP (some empallened bank) do I still need to pay annual maintenance account cost of CRA?
3) If I am joining NPS through one of the CRA can i switch to another CRA if there is a need in future?
Thank you
Hi Chandrapal,
1. eNPS through Aadhaar is the cheapest.
2. CRA charges have to be paid irrespective of the mode of joining.
3. As yet there was just one CRA, NSDL. Now, they have Karvy too. Btw, did you mean CRA or PoP?
Hi Deepesh,
I opened my NPS account using ICICI bank 6 months ago. However, I didn’t deposit any money in it.
Now I am considering using NPS, after reading your article, I tried opening an account on eNPS but it says PRAN already exist. I checked with CRA and they told me that neither account can not be closed nor it can be transferred to eNPS.
Need your guidance, how should I proceed to save PoP charges?
Hi Vivek,
Unfortunately, there is no way to transfer PoP to eNPS (or so I was told 6-8 months back by the NSDL CRA)
However, you can contribute through eNPS portal (and not through PoP) and save some of the cost.
Hi Deepesh,
I opened NPS through POP (icici) but now want to shift to eNPS..
I can see option “Shift to eNPS” udner “Transaction” menu. Is this an option for me to shift.?
Hi Mahantesh,
About 6-8 months back, this option was not there.
However, if you see this option, give it a try. CRA might have introduced this option recently.
Incidentally I am one who gave a long 1 year fight and approached regulators and finally PM’s website to get the option to switch to eNPS for those locked into the unjust PoP SP model. If you made a mistake of opting for PoP SP do exercise this option. It works. Do not spend your hard earned money on free loaders who do nothing and just earn commission for doing nothing.
Good work, Mayur!!!
Thanks for sharing Mayur. Can you please share the procedure to “shift to eNPS from PoP”. It would help many here.
/Sathish
Hi Sathish,
Suggest you go through the following post.
https://www.personalfinanceplan.in/product-review/karvy-new-cra-shift-enps/
https://www.personalfinanceplan.in/financial-planning/update-contact-nominee-details-nps-enps/
Thanks deepesh, I guess charges are revised for nps.
Hi Farhan,
You are right. A few CRA charges have been modified slightly. Will update soon.
Hi Deepesh
I activated tier 2 with PAN number and at that time was unaware of service charge in this case.Now that I have Aadhar with mobile number seeded,will I be exempted from service charge after seeding the Aadhar for each contribution in tier2.
Hi Manoj,
You will have to shift to eNPS if you want to avoid service charge.
Hi Deepesh,
You have written quite a thorough article, but I think there is a mistake.
You have written that the maximum cap on tax benefits under NPS is ₹50000 only.
But, as far as I know, this isn’t correct.
The ₹50000 you are talking about is the tax benefit under 80CCD(1B). And this benefit is over and above the tax benefit on ₹150000 under 80CCD(1).
It means that a user can get tax benefits on investments upto ₹150000 + ₹50000 = ₹200000 in NPS.
Correct your post and correct me.
Regards,
Hi Prabhat,
Thanks for your inputs.
The intent is to highlight only the exclusive tax benefit under Section 80CCD(1B). Guess that clarifies.
Sir,
Thanks for the detailed information in your article.
Could you clarify, whether, POP charges while investing through eNPS will be waived off if I seed aadhar in my NPS account previously opened without aadhar?
Regards
Peeyush, you need to shift to eNPS to save on PoP charges.
https://www.personalfinanceplan.in/product-review/karvy-new-cra-shift-enps/
HI Deepesh – Thanks for the article!!
You are welcome, Sathish.
Hi Deepesh,
I opened my eNPS account in last month using Pan card but as well as i mentioned my Aadhar number also during account opening. But still my account is freeze because my bank have not confirmed KYC to CRA. Now I got, it would be better if I choose Aadhar card option instead of pan card because it can cut 0.05% service charges of bank.
Sir Need your guidance, can I open new eNPS account using Aadhar number?
Sir please tell me total charges on eNPS account opened through pan card and opened through Aadhar number.
Hi Arun,
Suggest you follow up with the bank and get this done.
IF PRAN has been generated, you can’t generate a second PRAN.
Alternatively, you can talk to NSDL CRA and seek their opinion in this matter.
Subsequently, if you want, you can switch to eNPS.
Hi i am 62 now and just joined enps. How long should i stay invested? Any special strategy for my age?
Hi Deepesh,
Thanks for the above information.
Every time billing charges keeps deducting from my account on every quarterly. I don’t know on what basis they charge these billing charges. From the above table in your blog, i couldn’t match it with any of the values.
Mine is an E-NPS. Can you tell me on what basis these quarterly charges are being charged, and also is there any way to nullify it?
I’ve added some lump sum money at a time, but looks like after my 60 years, these money would go into negative with all these “quarterly” deductions.
Thanks
Raj
Hi Raj,
PFRDA keeps revising charges frequently. My post is dated.
However, for eNPS, the bulk of the charges are CRA charges.
Since the charges are absolute, the impact is greater on smaller portfolios.
1 which is the best mode to save charges in nps?
2 which is the best nps asp?
1. Shift to enps. You will save a lot of charges.
2. That gives you the best annuity rate.
Hi ,
I have made change of investment scheme from Auto to Active . Is there any charges for making this switch online ?
I am asking this question as I did not found any such mention on the NPS web portal where as i am able to see the (-) of 15000 in my portfolio .
I have made the request on August 31st 2021 evening ; probably post business hours cutoff time and I have seen the revised fund value on September 2nd 2021 .
Please guide on the charges applicable for change of investment scheme in NPS using online services if it exist.
Regards
Rohit Bharthuar