National Pension System(NPS)

About NPS

The National Pension System is a retirement saving scheme launched by the Government of India through which you can voluntarily invest your money on a regular basis to build a retirement corpus. NPS is a low-cost investment solution that lets you invest across asset classes and offers a host of tax benefits for individuals (under Section 80C and Section 80CCD). NPS is regulated by PFRDA i.e. Pension Fund Regulatory & Development Authority.

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Features & Benefits of NPS

Affordable – One can invest as low as 1000 per year to open and maintain NPS account

Tax Efficient – One can avail tax benefit upto Rs.1,50,000/- u/s 80C and additionally can invest Rs. 50,000/- and avail tax deduction on this investment u/s 80CCD (1B)

Flexible Investment Options – One can switch investments between equity, government or corporate bond & alternative investment.

Flexible Withdrawal – Partial withdrawal, pre mature exit etc. available subject to terms & conditions.

Low Cost – NPS is run on very low cost which is monitored by PFRDA.

Professional Management – NPS funds are managed by highly experienced fund management companies.

Fully Portable – Once a PRAN is created, it can be used across employers for contribution.

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Who Can Open NPS Account – Any Indian citizen, NRI or PIO who is between 18 & 70 years of age, can open an NPS account. Unique Permanent Retirement Account Number (PRAN), is created upon registration.

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Types of NPS Account – There are two types of NPS account:

Tier 1 Account – It is mandatory to open tier I account for having an NPS plan. Withdrawals from this account are conditional. Contribution to this account are eligible for deduction u/s 80C & 80CCD(1B).

Tier II Account – Those who have tier I account can also open tier II NPS account for emergency need. Withdrawals are allowed anytime without any limit. Contributions to this account are not eligible for any tax deduction.

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Investment Options – An NPS subscriber choose to invest in different proportion in

• Government Securities
• Corporate Bonds
• Equities
• Alternative Investment

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Withdrawals & Maturity

Partial Withdrawals – Allowed after 3 years of account opening upto 25% of contribution. Only 3 such withdrawals are allowed in the lifespan of the account. Withdrawals are tax free.

Pre-Mature Exit – Allowed after 5 years of account opening upto 20% of corpus. For balance amount the subscriber has to buy an annuity. Amount received as lumpsum is tax free and annuity is subject to tax as per tax slab.

Exit at Maturity – Exit at 60 is considered as exit at maturity. Upto 60% of corpus is allowed as withdrawal and for balance 40% of corpus the NPS subscriber has to buy an annuity. Amount received as lumpsum is tax free and annuity is subject to tax as per tax slab.

Death Benefit – Entire corpus can be claimed by legal heir or nominee upon death of NPS subscriber. Entire amount is tax free.

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Fee & Charges

*Minimum Rs. 30 per contribution.

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