What is National Pension Scheme India?
National Pension Scheme (NPS) in India is a voluntary, defined contribution retirement savings scheme. The NPS is designed to enable systematic savings during the subscriber’s working life. It helps a person to save adequate money till his/ her retirement and post retirement, acts as a good source of income for the subscriber.
Feature and Benefits of National Pension Scheme ( NPS )
– Portability :
NPS does not have any Geographical restrictions. An account opened in any state of India can be accessed from all over the country. NPS corporate account is transferable between employers.?
– Flexible :
NPS gives the subscriber the flexibility to choose the Fund Manager, Investment Option, Annuity Service Provider, etc. This gives you the control over your investments
– National Pension Scheme (NPS) Long term returns :
National Pension Scheme NPS is a long term investment plan. The minimum lock/returns in period for NPS is 10 years. Hence the subscriber gets the benefit of compounding which ensures higher corpus on maturity.
– National Pension Scheme (NPS) Tax Benefits :
Investing in NPS makes you eligible to claim additional tax deduction of Rs.50,000 under section National Pension Scheme 80CCD (1B) which would be over and above the ceiling limit of Rs. 1,50,000 as prescribed under National Pension Scheme section 80 C
– Facility to operate National Pension Scheme (NPS) through online :
You can register and access your national pension scheme NPS accounts online making it very convenient to access and manage
National Pension Scheme (NPS) Eligibility :
What’s the National Pension Scheme age limit? All Indian Citizens aged between 18 to 65 Years are eligible to enroll under NPS. The Applicant of NPS must be between 18 to 65 years on the date of application submission at the official NPS Trust website (npstrust.org.in)
Difference Between Tier 1 and Tier 2 NPS
National Pension Scheme NPS consists of 2 types of account: Tier 1 and Tier 2, The Differences between Tier 1 and Tier 2 are Explained below,
| Tier 1 account | Tier 2 account |
|---|---|
| 1. Compulsory to open | 1. Voluntary to open |
| 2. Minimum contribution at the time of account opening and for all subsequent transactions – Rs. 500 |
2. Minimum contribution at the time of account opening – Rs. 1000/- and for all subsequent transactions a minimum amount per contribution of Rs. 250/- |
| 3. Minimum number of contributions in a year -01 |
3. NIL |
| 4. Minimum contribution per year – Rs 1,000(If the subscriber contributes less than Rs. 1000 in a year, his/her account would be frozen and further transactions will be allowed only after the account is reactivated. In order to reactivate the account, the subscriber would have to pay the minimum contributions) However, there is no maximum limit of contribution |
4. No minimum or maximum limit |
| 5. Applicant can claim additional tax deduction against the contributions made |
5. There is no additional tax deduction for the contributions made in this account |
| 6. No such conditions, except the age criteria to enroll under NPS |
6. Members of Tier I are only eligible to open account |
| 7. Withdrawal of money invest is subject to terms and conditions |
7. Money invested can be withdrawn freely |
– National Pension Scheme Investment of Funds:
Option to choose where to invest your funds, Subscriber will have the following three options:
Asset Class E – Investments in predominantly equity market instruments.
Asset Class C – Investments in fixed income instruments other than Government securities.
Asset Class G – Investments in Government securities The subscriber can also invest 100% of the funds in either Asset class C or Asset class G and a maximum of 50% in Asset class E. An option to invest in all 3 asset classes is available, subject to terms and conditions as may be prescribed.
– In case of death of the subscriber, Nominees can receive 100 % of the NPS pension accumulated, as a lump sum. However, if the nominee wishes to continue with the NPS, he/she shall have to subscribe to NPS individually after following due KYC procedure.
– National Pension Scheme: Partial Withdrawal of NPS Contributions
You can make partial withdrawals from the NPS corpus for specified purposes. Under existing NPS withdrawal rules, the maximum amount that you can withdraw is up to 25% of your total contribution (not calculated on the total NPS account balance). However, to avail the NPS partial withdrawal benefit you need to be have been a NPS account subscriber for at least 10 years at the time of withdrawal. Partial withdrawals can only be made up to three times during the entire tenure of your NPS account. Under existing rules of the national pension system, these partial withdrawals are completely tax-free.
Partial NPS contribution withdrawals can be requested for only certain specified reasons such as:
Higher education of children; Marriage of children; Treatment for any specified illness, etc.
– National Pension Scheme: Premature withdrawal of NPS contribution:
The NPS Tier 1 account matures after the subscriber is 60 years old. Withdrawal before maturity for NPS Tier 1 can only be made after completion of three years from the date of opening of the NPS account. This type of NPS withdrawal is termed as “premature exit”. You can only withdraw 20% of your corpus at the time of premature exist. The remaining 80% must be used to buy an annuity. Both the 20% withdrawal and the annuity are taxable.
– National Pension Scheme: Withdrawal of NPS contribution upon Maturity:
The NPS Tier 1 account matures after the subscriber attains the age of 60 years, although you can delay withdrawal of these investments till the age of 70. Under existing NPS withdrawal rules for withdrawal after maturity, you can withdraw up to 60% of your corpus tax free. You are mandatorily required to use the remaining 40% of your corpus to buy an annuity. The annuity provides monthly pension to the NPS subscriber after retirement. The monthly pension received is taxable at the slab rate of the investor. However, this taxation will not occur at the time of NPS withdrawal but as per the slab rate in the financial year during which the pension pay-outs actually occur.
How to open National Pension Scheme NPS account online?
There are Two ways of Open National Pension Scheme NPS in India, First way is Online & Second way is Offline,
Let’s explore, How to apply for national pension scheme online,
NPS Login (National Pension Scheme) Online Mode:
STEP 1: Visit the official NPS Trust website (npstrust.org.in). Click on “Online Services” tab on the top of the page, then click on ‘I want to open a NPS account’ option from the drop down.
STEP 2: Select the type of CRA (Central Record Keeping Agency) of your choice. Enter the relevant details such as Applicant Type, whether to open Tier I account alone or both Tier I & Tier II account, Mobile Number, Aadhaar Number/ PAN, etc.
STEP 3: You need to upload your scanned photograph and signature (in specified format & size) Follow the relevant steps to complete the registration process and make the initial contribution amount.
NOTE:
- Alternatively, one can search ‘NPS [his/ her bank name]’ in the browser and click on the relevant link to visit their bank’s site and register for NPS.
NPS Login (National Pension Scheme) Offline Mode:
Another option is, one can register for NPS through ‘Offline Mode’, Let’s explore, How to apply for national pension scheme Offline
To open an NPS Account Offline, one can visit the nearest Point of Presence (POPs) registered under PFRDA to get the registration form. POPs are certain banks and financial institutions appointed by PFRDA to provide services to customers under the NPS.
Subscription to NPS, changing fund manager, and all related services under NPS are provided at these POPs. For subscribing to NPS, you need to fill out basic details in the application form and provide the necessary Know Your Customer (KYC) documents including Aadhar Card, PAN Card, address proof etc.
Relevant charges may be applicable during opening of a NPS account and while making contributions in future.
