What is NPS?
NPS(National Pension Scheme) is a voluntary Pension contribution system introduced by Government of India. It was initially launched for government employees in 2004 later it was made available for everyone in 2009. It is regulated by National Pension Scheme Trust (NPS Trust) which is specialised division of Pension Fund Regulatory and Development Authority (PFRDA). Similar to PPF and EPF, NPS also comes into EEE (Exempt-Exempt-Exempt) category where entire corpus is tax free. In this article we will be discussing about NPS contribution. What are its benefits. Rate of Interest (ROI).
Who can open NPS account?
Any citizen of India whether Resident or Non Resident is eligible.
Citizen aged between 18 to 70 years is eligible to open NPS account.
How to Open NPS Account?
Account can be opened in online or offline mode.
Online NPS account opening
Following procedure is used to open an online account
- Visit the NSDL eNPS website.
- Click on “Registration” and select “Register with Aadhar”
- Enter Aadhar number and click on “Generate OTP”.
- OTP will be sent to registered mobile number.
- Enter the OTP along with personal information, bank details, nomination details.
- After successful submission of application, Permanent Retirement Allotment Number (PRAN) is allotted.
- Photograph should be the same as in Photograph and signature tab.
- Then click on ”e-signature”. Once again an OTP will be sent to registered mobile number.
- Enter the OTP to verify signature and make the payment.
Link to open an online account :- https://enps.nsdl.com/eNPS/OnlineSubscriberRegistration.html?appType=main https://enps.nsdl.com/eNPS/OnlineSubscriberRegistration.html?appType=main
Offline NPS account opening
One can visit the nearest POPs (Point of Presence) registered under PFRDA to get registration form. POPs are some banks and financial institutions which are appointed by PFRDA to provide services under NPS scheme.
Types of NPS Account
There are two types Tier 1 and Tier 2.
- Tier 1 : It mandatory to open tier 1 account to enrol in NPS. There are restrictions and conditions for withdrawal from this account.
- Tier 2 : This account is optional and can be opened at the time of Tier 1 account opening or later. Anytime withdrawal is possible in this account.
NPS Contribution
- At the time of registration subscriber is required to contribute minimum Rs. 500 for tier 1 and Rs. 1000 for tier 2.
- The subsequent contributions are subject to the following conditions .
- Tier 1 :-
- Minimum Rs. 500 per contribution.
- Minimum contribution of Rs. 1000 per financial year.
- Minimum one contribution should be done in a year.
- Tier 2 :-
- Minimum Rs. 250 per contribution.
- No minimum balance required.
- Tier 1 :-
Tax Benefits
NPS investment is eligible for tax benefit as follows
- Benefits to Employee on self contribution
- Under section 80 CCD(1) tax deduction up to 10% of salary (basic+ DA) within overall ceiling of Rs. 1.50 lakh.
- Under section CCD (1B) tax deduction up to Rs. 50,000 can be claimed.
- Benefits to Employee on Employer’s contribution
- Under section 80 CCD(2) tax deduction up to 10% salary (14% if contribution is made by central government) over the limit of Rs. 1.50 lakh.
Withdrawal
- After attaining 60 years of age, subscriber becomes eligible to withdraw 60% accumulated corpus as lump sum. Remaining 40% should be used to purchase an annuity that would provide monthly income.
- In case of premature withdrawal, 80% of corpus has to be utilised to purchase an annuity that would provide regular monthly income.
- 25% of accumulated amount can be withdrawn after 3 years of regular payments. It is allowed only against specific reasons like higher education of children, marriage of children, for purchase of house, for treatment of critical illness.
- Upon death of subscriber entire Pension corpus would be paid to nominee or legal heir.
Interest rate
NPS is a market linked product where your money is invested in a mix of equity, corporate debt, government debt, and alternative assets. Subscriber has to decide the mix and fund manager, according to that he/she gets the return.
How to get NPS statement?
One can generate the statement by login in to his account by using login id and password provided by CRA. There is an option – Annual Transaction Statement on email on NSDL eNPS website.
Is NPS a good investment?
Yes it is good investment when it comes to retirement corpus. If one is aiming for other purposes like children’s education, children’s marriage, buying a house then PPF would be the better option.
To know more about PPF click the link below:
https://govtschemesin.com/index.php/2022/08/06/what-is-ppf-account/