National Pension Scheme (NPS) is an Investment option which helps to build a corpus for retirement purpose. lt is a voluntary contribution, market-linked retirement savings scheme that enables the subscribers to save money for their future through systematic savings during their working life. The scheme helps to build the habit of saving for retirement amongst the citizens.
Under the NPS, individual savings are pooled into a pension fund which is invested by PFRDA regulated professional fund managers as per the approved investment guidelines into the diversified portfolios comprising government bonds, bills, corporate debentures, and shares. At the time of retirement, the subscriber can use 40% of the accumulated amount to buy the annuity plan and can withdraw 60% the remaining amount.
Flexible Investment Options – NPS offers a range of investment options and choice of Pension Fund Manager (PFMs) for planning the growth of your investments in a reasonable manner and see your money grow. Individuals can switch over from one investment option to another or from one fund manager to another subject to certain regulatory restrictions.
Simple account Opening — NPS account can be opened online by using your Aadhaar card and also it can be done by giving a physical application form. Subscriber will get a Permanent Retirement Account Number (PRAN), which is a unique number and it remains with the subscriber throughout his lifetime. The scheme is structured into two tiers:
This is the non-withdrawable permanent retirement account into which the accumulations are deposited and invested as per the option of the subscriber.
This is a voluntary withdrawable account which is allowed only when there is an active Tier I account in the name of the subscriber. The withdrawals are permitted from this account as per the needs of the subscriber as and when claimed.
NPS provides seamless portability across jobs and across locations, unlike all current pension plans, including that of the EPFO. It would provide hassle-free arrangement for the individual subscribers.
NPS is regulated by PFRDA, with transparent investment norms, regular monitoring and performance review of fund managers by NPS Trust Regulated-NPS is regulated by PFRDA, with transparent investment norms, regular monitoring and performance review of fund managers by NPS Trust.
Individuals who are employed and contributing to NPS would enjoy tax benefits on their own contributions as well as their employer’s contribution as under:-
(a) Employee’s own contribution – Eligible for tax deduction up to 10% of Salary (Basic + DA) under Section 80 CCD(1) within the overall ceiling of Rs. 1.50 lacs under Sec 80 CCE.
(b) Employer’s contribution — The employee is eligible for tax deduction up to 10% of Salary (Basic + DA) contributed by employer under Sec 80 CCD(2) over and above the limit of Rs. 1.50 lacs provided under Sec 80 CCE.
Eligible for tax deduction up to 20 % of gross income under Sec 80 CCD (1) within the overall ceiling of Rs. 1.50 lacs under Sec 80 CCE. Subscriber is allowed a deduction in addition to the deduction allowed under Sec. 80CCD(1) for additional contribution in his NPS account subject to a maximum investment of Rs. 50,000/- under sec. 80CCD 1(B) Tax benefits would be applicable as per the Income Tax Act, 1961 as amended from time to time.
NPS architecture consists of NPS Trust which is entrusted with safeguarding subscribers’ interests. Central Recordkeeping Agency (CRA) which maintains the data and records Point of Presence (POP) and aggregators as collection and distribution arms Custodian to take care of the assets purchased by the Fund managers and Trustee bank to manage the banking operations.
Competing pension fund managers for generating and maximizing returns on investments of subscribers.
At present there are 7 pension fund managers managing the pension wealth of subscribers:
This is the easiest way of opening an NPS account, if your Mobile number is registered with your Aadhar Number you can complete the process in a few minutes. Payment can be done by using your debit card or Internet banking. Physical Mode: Client will have to sign to the NPS application form and provide basic KYC documents and the investment cheque.
This is the easiest way of opening an NPS account, if your Mobile number is registered with your Aadhar Number you can complete the process in a few minutes. Payment can be done by using your debit card or Internet banking.
Client will have to sign to the NPS application form and provide basic KYC documents and the investment cheque.