Blog Post

NATIONAL PENSION SCHEME

This is a pension scheme which is open for public to invest in a pension account at a regular interval of time during their employment for their retirement benefit run by central government this is scheme is not for armed forces, after retirement employees can take out certain percentage from the corpus remaining amount you will receive as a pension post your retirement. Earlier NPS scheme only covered central government employees now it is open for everyone, it also has tax benefits under section 80C and 80CCD, it is most beneficial for salaried persons.

 

What are the benefits of National Pension Scheme?

  • It provides higher returns upto 10% compared to other tax saving investment like public provident funds.
  • You can change your fund manager if you are not happy with the performance of your fund.
  • Stabilizes the risk-return equation in the interest of investors, which means the corpus is safe from the equity market volatility. The earning potential of NPS is higher as compared to other fixed income schemes.
  • There is a deduction of up to Rs. 1.5 lakhs to be claimed for NPS – for your contribution as well as for the contribution of the employer.
  • You cannot withdraw the entire corpus of the NPS scheme after your retirement. You are compulsorily required to keep aside at least 40% of the corpus to receive a regular pension from a PFRDA-registered insurance firm.  The remaining 60% is tax-free now.
  • As a pension scheme, it is important for you to continue investing until the age of 60. However, if you have been investing for at least 3 years, you may withdraw up to 25% for certain purposes. These include children’s wedding or higher studies, building/buying a house or medical treatment of self/family, among others. You can make a withdrawal for up to 3 times (with a gap of 5 years) in the entire tenure.
  • The NPS invests in different schemes, and the Scheme E of the NPS invests in equity. You can allocate a maximum of 50% of your investment to equities. There are two options to invest in – auto choice or active choice. The auto choice decides the risk profile of your investments as per your age. For instance, the older you are, the more stable and less risky your investments. The active choice allows you to decide the scheme and to split your investments.

 

How to open NPS Account?

Online NPS Account

  • Visit enps.nsdl.com
  • Link your Aadhaar and pan and mobile number.
  • Validate your registration using OTP sent to your mobile.
  • A permanent retirement account number will generate to login into the account.

 

Offline NPS Account

To open an NPS account offline or manually, you will have to find a Bank. Collect a subscriber form from your nearest Bank and submit it along with the KYC papers. Ignore if you are already KYC-compliant with that bank. Once you make the initial investment (not less than Rs. 500 or Rs. 250 monthlies or Rs.  1,000 annually), the bank will send you a PRAN – Permanent Retirement Account Number. This number and the password in your sealed welcome kit will help you operate your account. There is a one-time registration fee of Rs.125 for this process.

 

How many types of NPS Account?

  • NPS TIER 1 ACCOUNT -minimum contribution is Rs 500 or Rs 1,000 p.a., and tax exemption is Up to Rs 2 lakh p.a. (Under 80C and 80CCD)
  • NPS TIER 2 ACCOUNT- minimum contribution is Rs 250, and tax exemption 1.5 lakh for government employees Other Employees-None

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