NPS account locked? Here's how you can reactivate it

I have conveniently ignored depositing the minimum required contribution in my NPS account as I opted for the new tax regime last year. How to activate my NPS account, which is inactive now? – SR Sarma, Visakhapatnam

There are more slabs with lower tax rates and minimal documentation required in the new tax regime, and filing of ITR is a bit easier. However, the old tax regime is still attractive for many, as it offers many exemptions and deductions that minimize tax liability. Therefore, only a few taxpayers opt for the new tax regime introduced in the Finance Act, 2020. Tax-saving schemes such as PPF, NPS, and others under section 80C must be maintained by contributing the minimum annual deposit irrespective of the tax regime opted in a financial year. Every taxpayer who opened a Sukanya Samriddhi Yojana, Public Provident Fund, National Pension System must deposit the mandatorily minimum yearly contribution into their SSY, PPF, NPS accounts on or before 31 March of every year. Otherwise, these accounts will become inoperative and inactive or dormant accounts. It is like continuing with the annual insurance premiums to keep the insurance in force, regardless of the tax regime opted for during a financial year.

One must deposit a minimum annual contribution of Rs 6000 in the NPS Tier-I account in a financial year. The deadline of 31 March must be adhered to, failing which, the Pension Fund Regulatory and Development Authority (PFRDA) will freeze the NPS account. To reactivate the NPS account, the NPS subscriber will have to deposit the total minimum contributions for the period or years of freeze along with a penalty of Rs 100 per year of nil contributions. Similarly, the NPS subscribers must deposit a minimum annual contribution of Rs 2000 in the NPS Tier-II account in a financial year. There is a revival penalty of Rs 100 per year, even in the case of frozen Tier-II accounts. However, the NPS trust will keep the subscribers' accumulated corpus invested, even though the account is frozen. Like the active NPS accounts, the corpus of the frozen account holders will be invested with the eight Pension Fund Managers (PFM's) who manage the subscribers' funds as per the option chosen by the subscribers.

In the case of the Sukanya Samriddhi Yojana Scheme, the parent or guardians must deposit a minimum of Rs 250 per financial year in the Sukanya Samriddhi Yojana account to keep the account operative. Failing to deposit the minimum contribution will make the account dormant and inoperative. Inoperative SSY accounts can be revived by depositing a penalty of Rs 50 per non-contributing year and the minimum specified amount of Rs 250 for each defaulted year. The maximum period for making deposits is 15 years from the date of opening of the account. Similarly, inactive SSY accounts are eligible for revival within 15 years from the SSY account's commencement date. The tenure of the SSY deposit is 21 years from the date of opening the account. Parents or Guardians must deposit a minimum of Rs 250 and a maximum of Rs 1,50,000 contribution in SSY account per financial year, irrespective of the tax regime opted for during a financial year. One must deposit the prescribed minimum amount on or before 31 March.

The PPF account holders must deposit a minimum of Rs 500 and a maximum of Rs 1,50,000 per financial year, regardless of the tax regime opted for during a financial year. One must deposit the prescribed minimum amount on or before 31 March. The PPF account holders or subscribers must deposit the minimum arrear subscription of Rs 500 for each year and a penalty of Rs 50 for each non-contributing year to regularise or make it operative. The subscriber's PPF account will become inactive if they fail to contribute Rs 500 by the due date in any financial year. One cannot avail loans from inactive PPF accounts, and PPF accounts cannot be closed before 15 years. The PPF account holders cannot make partial withdrawals unless the account is activated. However, as per the PPF rules in 2016, PPF account holders are allowed to close the PPF accounts prematurely in certain health conditions and financial emergencies.

(The author is a SEBI licensed Research Analyst. The alumnus of the Indian Institute of Foreign Trade (IIFT), he had held leadership roles at National Geographic, Reliance Radio Television Luxembourg, STAR TV, etc)