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The Central Government of India has introduced an extraordinary pension scheme for the citizens of India called the National Pension Scheme. The scheme has been introduced w.e.f 01st January 2004 for the benefit of all the Indian Citizens, except the armed forces. This has been made available to the citizens since 01st May 2009.
The regulatory body of the National Pension Scheme is ‘Pension Fund Regulatory and Development Authority (PFRDA)’. However, the administration, record-keeping and customer service shall be taken care by the ‘National Securities Depository Limited (NSDL).
The Central Government has introduced the National Pension Scheme for the senior citizens of India by offering pension. This pension is paid from the corpus created by voluntary contributions made by such individuals during the working age of their life. The Central Government has introduced this National Pension Scheme keeping in mind the below given objectives:
The following article will give you in-depth understanding about the National Pension Scheme Tier 1 account. Let us read further to know about this exemplary scheme.
If a government employee or a private employee wishes to open a Tier 1 Account under the National Pension Scheme, they have to satisfy the following eligibility criteria.
The scheme offers key features for the Tier 1 account held under the National Pension Scheme.
The corpus collected in the NPS Tier 1 account of the private sector or non-government sector individuals is invested in various investment instruments like bank time deposit scheme, shares, stocks, bonds held by government and corporate entities etc.
The government employees need to invest 10% of their basic salary + Dearness Allowance every year under the National Pension Schemes Tier 1 account.
Following is a detailed process for opening a Tier 1 account under the National Pension Scheme. The National Pension Schemes allows individuals to open account in two ways namely:
So, if you wish to open a Tier 1 account follow the below given steps:
Individuals can open a Tier 1 account under NPS scheme using any ONE of the following options
In this manner, individuals can open Tier 1 NPS account via online channel. Following are the steps to open the account via offline channel.
Thus, in this manner, any individual whether government employee or non-government employee can easily apply and register for Tier 1 account of National Pension Scheme.
Following is the list of mandatory documents required for opening NPS Tier 1 Account
The subscribers of the Tier 1 account under NPS can avail tax benefit as under:
All salaried individuals who are contributing towards NPS Tier 1 account are eligible to claim tax deduction up to 10% of gross income under Sec 80 CCD (1). This tax deduction is allowed within the entire tax benefit ceiling of Rs. 1.50 lakhs offered u/s 80 CCE.
Corporate Subscriber - Employer's NPS contribution (for the benefit of employee) up to 10% of salary (Basic + DA), is deductible from taxable income, without any monetary limit.
Corporates - Employer’s Contribution towards NPS up to 10% of salary (Basic + DA) can be deducted as ‘Business Expense’ from their Profit & Loss Account.
An additional exclusive tax benefit is offered to all NPS Subscribers u/s 80CCD for investing up to Rs. 50,000 in Tier 1 account of NPS. This tax benefit is offered to the Tier 1 account holders over and above the deduction of Rs. 1.50 lakhs available u/s 80C of the IT Act, 1961.
Kindly note, all the tax benefits offered under the National Pension scheme are applicable to the Tier 1 account holders only.
The returns of NPS Tier 1 account can be earned by investing the corpus in 4 different classes of NPS assets under the Active Choice. The NPS subscriber can invest its money in 4 different asset classes namely:
Subscribers of the NPS Tier 1 account can split their corpus in various asset classes as per their convenience and financial goals. The NPS also allows subscribers to choose any one from the 8 available fund managers for overlooking the corpus as pension fund managers. Thus, the returns receivable on the invested corpus depend on the type of asset class selected and the fund manager opted by the subscriber.
Who can open Tier 1 NPS?
Any citizen of India, whether resident or non-resident, can open Tier 1 account under National Pension Scheme subject to following conditions: Must be aged between 18 years to 60 years on the date of submitting the form with NPS Individuals can open Tier 1 NPS account as an individual subscriber or on employer-employee grounds.
What is the difference between Tier 1 and Tier 2 NPS?
Tier 1 account under NPS scheme is more of retirement corpus building account which restricts the subscriber to withdraw money while tier 2 account under NPS scheme is a voluntary account which allows the subscribers to invest and withdraw money anytime.
Can I withdraw money from NPS Tier 1?
Yes, you can withdraw money from your NPS Tier 1 Account subject to fulfilment of certain terms and conditions.
What is NPS Tier?
The National Pension Scheme is offering various investment opportunities to individuals under its tier 1 and tier 2 accounts. These tier accounts are created to offer varied investment options to the subscribers as per their financial goals.
Can I have more than ONE NPS account?
No, NPS does not allow subscribers to hold multiple accounts. A single individual can hold only one account.
Will the government contribute to NPS scheme?
No, the government shall not contribute any amount to the NPS account.