National Pension System or NPS System, all details are here
The Indian government introduced the National Pension System or NPS Scheme, an investment-based pension scheme. The Pension Fund Regulatory and Development Authority oversees and manages the program. The Indian government established it primarily to give seniors in India financial stability. By investing in this secure market-based planning, individuals may effectively plan their retirement years with the help of the National Pension System (NPS), which provides exceptional long-term savings alternatives.
In Short:
-
- National Pension System or NPS System
- Citizen Oriented Model
- Who can open NPS account under All Citizen Model?
- Best age limit to start investing in NPS
- Why to Open NPS Account
- Tax benefits from the National Pension System or NPS Scheme
- How to open NPS account on line
- How to invest in NPS
- Key Point to Remember while Contributing in National Pension System
- Types of NPS Accounts.
- Compare NPS with ELSS.
- FAQ
Also Read: Atal Pension Yojna : eAPY : लाभ, निवेश और निकासी; कैसे करें आवेदन?
1. National Pension System or NPS Scheme – Citizen Oriented Model
Customers can make specified contributions to planned savings through the National Pension System, a voluntary retirement savings program, guaranteeing a pension in the future. It is an attempt to find a long-term solution to the issue of giving each Indian citizen a sufficient retirement income.
The subscriber may access the gained pension amount under the plan through a life insurance business accredited by PFRDA (Pension Fund Regulatory and Development Authority) at the moment of a regular retirement from the NPS (National Pension System). If they would like, they can take out a lump sum payment from the pension fund in addition to purchasing a life annuity from it.
The National Pension System is a defined-contribution pension system in India regulated by PFRDA (Pension Fund Regulatory and Development Authority)is the nodal agency for the implementation and monitoring of NPS (National Pension System) which is under the jurisdiction of the Ministry of Finance of the Government of India.
2. Who can open NPS account under All Citizen Model?
An Indian citizen, resident or not, provided they meet the requirements below. The applicant must conform to the specified KYC criteria and be between the ages of 18 and 60 on the day of application submission.
3. Best age limit to start investing in NPS
Indian citizen start investing in NPS as early as age of 18 and aim to receive a steady income after the retirement age of 60. NPS is market-linked and somewhat risky, but it’s regulated by the PFRDA to reduce the chance of malpractices. In some cases, NPS can provide returns of up to 10%, while PPF, which is government-backed, offers more stable returns of around 7–8%.
4. Why to Open NPS Account
Some of the major advantages of the National Pension System, or NPS Scheme, are mentioned below. It is a practical choice to ensure the future of Indian citizens because of all these aspects.
(i). The National Pension Scheme, or NPS, is considered to be the most reasonably priced pension plan globally. The lowest fees are also associated with fund management and administration.
(ii). The candidates must get a Permanent Retirement Account Number or PRAN and create an account with any of the POPs (Point of Presence)offered by the Head Post Offices in India.
(iii). The candidate has the choice of selecting an auto option to receive higher returns or own investment option and pension fund.
(iv). Even if the applicant moves or changes jobs or cities, Indian citizen can still manage their account and make contributions through any POP-SP from anywhere in the nation. additionally make contributions via eNPS. The account can be moved to any other sector, such as the corporate or government sectors, if the customer obtains employment.
5. Tax benefits from the National Pension System or NPS Scheme
The following tax incentives are available to Indian citizens who are employed and pay into the National Pension System (NPS):
They will receive exemptions from taxes on both their employer’s and their own payments, Let’s find out?
(i). Eligible for a tax deduction under Section 80 CCD(1) of up to 10% of pay (Basic + DA), with a maximum total deduction of Rs 1.50 lakh under Section 80CCE.
(ii). Up to 10% of the wage (Basic + DA) supplied by the employer is eligible for tax deduction under section 80 CCD(2) for the employee. This amount exceeds the Rs 1.50 lakh limit set out under section 80 CCE.
(iii). Section 80 CCD(1) allows self-employed individuals to deduct up to 10% of their gross income from taxes, up to a total of Rs 1.50 lakh under section 80 CCE.
6. How to open NPS account on line or How to Login NPS
To open an NPS (National Pension System) account online, Indian citizens visit the eNPS portal of the CRA of their choice, or use internet banking:
1. Log in to internet banking
2. Select NPS in the Service Requests section
3. Provide the required details, including investment, personal, and nominee details
4. Upload photo and signature
5. Confirm filled details and then submit
6. Make an initial contribution of at least Rs 500
7. Complete the payment through HDFC Bank Net Banking or a payment gateway
8. Once the payment is successful, subscriber will receive a 12-digit PRAN and a PDF form based on their data
Subscriber will also receive the PRAN via registered email and SMS.
9. Complete the online e-sign or OTP based confirmation to avoid submitting a physical registration form.
7. How to invest in NPS
To invest in the National Pension Scheme (NPS), Indian citizens can either open an account online or offline:
1. Online.
Subscriber can use the NPS mobile app or a bank’s online service:
i. Download the NPS app from the Google Play Store
ii. Enter Permanent Retirement Account Number (PRAN), date of birth, and captcha
iii. Click Verify PRAN and enter the OTP sent to the registered mobile number or email address
iv. Select the account wish to contribute to (Tier I or Tier II) and enter the amount
v. The system will calculate the total amount to be paid, including any charges.
2. Offline
Subscriber can visit a Point of Presence (PoP), such as a bank, that’s registered with the PFRDA:
i. Collect a subscriber form from the PoP and submit it along with any KYC documents
ii. Make initial investment, which must be at least Rs. 500, Rs. 250 per month, or Rs. 1,000 per year
iii. The PoP will send subscriber’s PRAN and a sealed welcome kit with a password.
8. Key Point to Remember while Contributing in National Pension System
The subscriber can contribute the amount through cash, local cheque, demand draft or Electronic Clearing System (ECS) at his chosen POP-SP. However, for cash transactions above Rs 50000/- the subscriber will have to submit a copy of PAN card as per Anti-Money Laundering (AML) rules. Also, no outstation check will be accepted.
9. Types of NPS Accounts
There are two types of NPS accounts.
(i). Tier I Account: This is a retirement account where, in accordance with the applicable income tax regulations, the applicant may deduct contributions from their taxes.
Note: Investment can be made up to Rs. 2 lakhs in an NPS Tier 1 account and claim a deduction for the full amount, i.e. Rs. 1.50 lakh under Sec 80CCD(1) and Rs. 50,000/- under Section 80CCD(1B).
(ii). Tier-II Account: This is an account for voluntary savings. Subscriber or applicant is free to take his savings out of this account at anytime. The applicant is not eligible to receive any tax advantages on contributions made to this account because it is not a retirement account.
10. Compare NPS and ELSS
The National Pension Scheme (NPS) incorporates equity allocation, which is an appealing feature. Still, the equity allocation is less than that of mutual funds that save taxes. Plans for equity-linked savings schemes (ELSS), which invest mostly in stocks, have an opportunity to provide higher returns than NPS. Additionally, tax-saving mutual funds have a shorter lock-in period than NPS.
FAQ: (Frequently Asked Questions)
1. Which is better NPS or PPF?
NPS is market linked and a bit risky, but it is strictly regulated by the PFRDA so there is almost no chance of malpractices. PPF is entirely government backed so there is almost risk free returns. Returns: NPS can give up to 10% in some cases whereas PPF provides low but stable returns around 7-8%.
2. Which bank is best for NPS?
ICICI Prudential Pension Fund. …
LIC Pension Fund. …
Axis Pension Fund Management Limited. …
UTI Retirement Solutions Fund. …
Kotak Mahindra Pension Fund. …
Aditya Birla Sunlife Pension Fund. …
Tata Pension Management Limited. …
3. Can I invest 50000 in NPS in one time?
Customer can invest up to Rs. 2 lakhs in an NPS Tier 1 account and claim a deduction for the full amount, i.e. Rs. 1.50 lakh under Sec 80CCD(1) and Rs. 50,000/- under Section 80CCD(1B)
4. Can I withdraw money from NPS?
Customer can withdraw up to a maximum of 3 times during the entire tenure of NPS account. and can withdraw up to 25% of the contribution in NPS at any time, excluding those made by customer’s employer, if any
5. Can I hold 2 NPS accounts?
No, opening multiple NPS accounts for an individual is not allowed under NPS. However an Individual can have one account in NPS and another account in Atal Pension Yojna.
6. Is NPS tax free?
If Customer uses 60% of NPS corpus for lump sum withdrawal and remaining 40% for annuity purchase, then no worries to pay any tax at that time. Only the annuity income that to be received in the subsequent years will be subject to income tax as per the applicable tax slab.
7. Can I withdraw 100% from NPS?
Yes, a subscriber can claim withdrawal in following cases:
In case of Superannuation- A Subscriber can claim 100% Withdrawal if the total accumulated corpus is less than or equal to Rs. 5 lakh at the time of Superannuation/attaining age of 60 years.
Discover more from
Subscribe to get the latest posts sent to your email.
3 thoughts on “National Pension System; NPS : Open NPS account, Tier I and Tier II, Why to Open, Tax Benefits 80 CCD, Contributions, PRAN”