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NPS - National Pension Scheme

Launched by the Pension Fund Regulatory and Development Authority (PFRDA) in 2004, National Pension Scheme is a retirement plan similar to a Public Provident Fund (PPF) or an Employee Provident Fund (EPF). It is voluntary in nature and the individual's savings is pooled in a pension fund. It is a very good option of a systematic investment plan for any working individual. An NPS aims to provide stable and regular income post retirement.

The minimum yearly contribution is INR. 6,000 which can be made as a lump sum investment or through installments of INR. 500. Every Indian citizen between the age of 18-60 years can apply for an NPS

Types of NPS Accounts

When you enroll for an NPS, you will be issued a Permanent Retirement Account Number (PRAN), which is required to access your respective accounts throughout the policy term.

There are two types on National Payment Schemes.

NPS - Tier 1 Account

This a basic pension account where you can withdraw only 20% of the investment and 80% of the remainder remains invested in the pension fund provided you are below 60 years of age. Post 60 years of age, an approximate of 60% can be withdrawn while the remainder 40% is utilised for purchasing annuities.

NPS - Tier 2 Account

This plan was launched in 2009 and offers great flexibility. Under this plan, the account holders can withdraw their amount without any withdrawal charges or penalty. Also, they offer investors an option to invest either in Equity, Corporate Debt, Government Securities, Alternative Investment Funds.

Swavalamban Yojna Account

To provide financial support to the economically backward classes and especially the unorganized sector of the workforce, the government introduced this plan. For these accounts, the government made contributions of INR1000 for the first four years after enrollment.

Note: This plan has been replaced by Atal Pension Yojna.

National Pension Scheme v/s New Pension Scheme

FeaturesNational Pension SchemeNew Pension Scheme
Employees ContributionYou are required to contribute 10% of the Special Pay, Basic Pay and all other allowances.All is included along with Dearness Allowance
Employees ContributionCan be stopped by employees by providing a notification one month in advance.You can withdraw as well as contribute at any given time.
Managing AuthorityP.F trustThere are 6 fund managers appointed by PFRDA.
Scope of RegulationNonePFRDA.
ChargesThere is no extra fee/charges on subscribers.There are fixed as well as variable charges

Features of NPS

  • Eligible for all Indian citizens between the ages of 18 to 65. You can make a minimum contribution of INR. 500 at the time of opening the account.

  • It offers transparency to the subscriber and is a low cost investment option. You can choose your own pension fund schemes where the fund managers will be aware of how the investment is doing on a routine basis.

  • The plan matures when the subscriber reaches retirement.

  • 60% of the corpus can with withdrawn on maturity and the remaining 40% is used to purchase annuities.

  • Eligible for tax deductions under section 80C of the Income Tax Act.

  • The application process is extremely simple since the subscriber only has to open up an account at the respective nodal office and acquire a PRAN

  • Employees are allocated unique PRANs, your account can be identified by the same PRAN across PAN India.

  • You can access all details pertaining to the NPS online.

  • Offers a wide range of options to choose from, which include Pension Fund Managers, Funds to allocate their money to and customer services providers among others.

  • You get the flexibility to switch between fund managers and investment options.

  • You can change the contribution amount as well as the contribution frequency at will.

  • It offers extremely low fund management charges.

Benefits Offered by NPS

  • It is open to every Indian citizen on a voluntary basis.

  • You have the advantage to decide how much they are willing to contribute.

  • The application process is extremely convenient and easy.

  • You can choose where to invest your money as well as who should manage their investments.

  • You can access your NPS account from anywhere in India at any time.

Eligibility Criteria for NPS

  • You should be at least 18 years of age and not more than 60 years during the time of your application.

  • You must be of sound mind.

  • You must be a first-time subscriber to the NPS.

  • You must adhere to the KYC rules set by the Pension Fund Regulatory Development Authority (PFRDA)

The following individuals are not eligible to avail the NPS:

  • Individuals who are not of sound mind

  • Individuals who already hold accounts with NPS

  • An undischarged insolvent

How to Apply for the NPS

  • First, you need to acquire an application form for a Permanent Retirement Account Number (PRAN). It is available at any Point of Presence–Service Providers (POP-SP). A POP-SP is any financial institution that is authorized as a collection point for NPS subscribers. You can also visit the official website of NSDL for the same.

  • You need to submit the duly filled application form to the POP-SP along with KYC verification documents - Aadhaar and PAN.

  • Following the KYC verification, you need to make a minimum contribution of INR. 500.

  • Post submission, you will receive a receipt number to help track the status of your PRAN card.

  • Next, the PRAN Card is sent to the Central Recordkeeping Agency (CRA) that with respect to the applicant’s registered address.

Note: You can only begin contributing once you receive your PRAN card.

Which individuals or entities can avail NPS Scheme?

Any Indian citizen aged between 18 years and 60 years is eligible for an NPS scheme.

For Individuals Employed with the Central Government

Any individual employed with the Central Government as well as Central Autonomous Bodies is eligible for an NPS provided they have commenced employment on the 1st of January, 2004 or any time after.

For Individuals Employed with the State Government

Any Individual employed with State Government as well as State Autonomous Bodies, but who have commenced employment following the notification date set by their respective State Governments, are eligible for NPS.

For Corporates

Companies have the option to choose a Pension Fund Manager as per their requirements. This allows for flexible choice of investments and the additional benefit of deciding the amount of funds to be directed to the different asset classes on offer.

Classification in Asset Classes

Since you can choose your fund manager, your investment portfolio is divided into asset classes.

  • Equity or E- A 'high return-high risk' fund that invests predominantly in equity market instruments

  • Corporate Debt or C - A 'medium return-medium risk' fund that invests predominantly in fixed income bearing instruments

  • Government Securities or G - A 'low return-low risk' fund that invests purely in Government Securities

  • Alternative Investment Funds or A –In this asset class, investments are being made in instruments like CMBS, MBS, REITS, AIFs, Invlts etc.

Pension Fund Regulatory & Development Authority

The PFRDA is the statutory body for pension regulation in India. It was set up by the Indian government on August 23, 2003 to regulate and oversee pension funds in India. Currently, PFRDA is regulating and administering the National Pension System (NPS) along with administering the Atal Pension Yojana (APY) which is a defined benefits pension scheme for the unorganized sector, guaranteed by the Government of India.

Central Recordkeeping Agency (CRA)

This is the official record-keeping agency set up for the NPS after the PFRDA and NSDL e-Governance Infrastructure Limited came to an agreement. If you are employed in any of the government departments, you are required to open an account with the CRA. This account will assign your PRAN number.

The CRA serves the following functions:

  • Providing services to all NPS subscribers.
  • Ensures that each individual employee is issued a unique PRAN.
  • Overseeing the issuance of PRANs to subscribers through a database.
  • Records transactions related to PRAN and provides interface between NPS and PFRDA.
  • Keeps a check on contributions by subscribers with respect to the pension funds on a day to day basis.
  • Providing subscribers with statements relating to their PRANs.
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Taxation and Withdrawal

Individuals are eligible for tax deductions up to INR.1.5 lakh on their contribution under Section 80C of the Income Tax Act.

Only 40% of the sum withdrawn is tax free while the remainder 60% is subject to tax. A partial withdrawal is only permitted after the subscriber has completed 10 years of contribution and in cases of emergencies where subscribers who have contributed for a minimum of 3 years to the scheme can withdraw up to 25% of the corpus.

Charges by Points of Presence (POP) & Central Recordkeeping Agency (CRA)

Note: In the case of Tier I accounts, the employer is required to pay all fees and charges. In case of Tier II accounts, the individual is liable to pay for all transnational and activation charges.

The following charges are levied by the CRA:

  • PRA account opening fees - INR. 50
  • PRA account maintenance charges - INR. 190 per year
  • Transaction fees - INR. 4 per transaction

The following charges are levied by the POP:

  • Registration fees of - INR. 100
  • 0.25% of the initial amount contributed by the subscriber for contribution upload as well as any transactions pertaining to contributions uploads thereafter.
  • Transactions wherein the subscriber has not made a contribution - INR. 20

Rules regarding withdrawals from NPS

You can only withdraw from your NPS scheme under the following conditions:

  • If a minimum of 40% of the total accumulated pension of the subscriber is used for the purchase of annuities, then the remaining accumulated balance is given to the subscriber in the form of a lump sum.

  • In the event of the death of the subscriber, the total pension that the subscriber has accumulated will be paid to his or her nominee.

  • If a minimum of 80% of the total accumulated pension of the subscriber is used for purchasing annuities, then the remaining balance will be given out to the subscriber in the form of a lump sum.

Procedures & documentations required for NPS withdrawals

You will need to submit a withdrawal application form to the respective Point of Presence along with the following documents:

  • Original PRAN card.

  • Identity Proof such as Passport, PAN Card, Driver’s License, etc.

  • Address Proof such as Passport, Voters ID, Aadhar Card, etc.

  • Bank certificates or canceled cheques that contain the name of the subscriber as well as his bank account number with IFSC code. This is required for transfer of funds either electronically or through a direct credit.

  • Post authentication, the Point of Presence will send the documents to the CRA and NSDL.

How to File Withdrawal Claims

You need to keep the following things in mind before filing a withdrawal claim:

  • A withdrawal claim must be filed at the nodal office of the Central Recordkeeping Agency (CRA) or the National Pension Scheme Trust.

  • Withdrawal claims filed for constructing a home should be verified with proof that the property belongs to you or is held jointly with your spouse. Additionally, the withdrawal is only permitted if you do not own other property apart from ancestral property.

  • For the treatment of medical illnesses, the request for withdrawal can be made by your family member.

  • You are only permitted to make 3 withdrawals during the tenure of the NPS.

  • You also require a withdrawal form as per your status and mode of employment.

  • Withdrawals forms for government employees - Form 101GS, 101GP and 103GD.

  • Withdrawal forms for corporates - Form 301, 302 and 303.

  • Withdrawal forms for Swavalamban Subscribers - Form 501, 502, 503.

Death Benefits Provided under NPS

In order for a nominee to have the NPS Death Benefits, they are required to provide the following documents:

  • The relevant forms pertaining to withdrawals should be completed and submitted depending on the subscriber’s employment status.

  • The PRAN Card in original.

  • A canceled cheque showing relevant details of the nominee such as his or her bank account number as well as IFSC Code.

  • The subscriber’s death certificate.

  • Any document or certificate that proves that the person claiming the amount is the legal nominee or heir of the subscriber.

  • The nominee’s ID proof as well as Proof of Address.

NPS vs EPF

National Pension SchemeEmployee Provident Fund
A voluntary scheme which allows one to contribute any amount above Rs.6000 a year for Tier I and INR. 2000 a year for Tier II.EPF is compulsory for all employees in the organized sector with an income of above INR.15,000 per month.
Option to choose your fund manager from the banks mentioned by PFRDA.All EPF accounts are managed by the EPFO.
Voluntary contributions are made by subscribers at any chosen time period.12% of the employee contribution is matched with 12% of the employer contribution.
The rate of interest depends upon the asset allocation chosen fund managerInterest rates are declared by the Ministry of Finance with regards to the EPF trustees.

NPS vs Atal Pension Yojna

National Pension SchemeAtal Pension Yojna
Minimum age for enrollment: 18 years. Maximum age for enrollment: 60 years.Minimum age for enrollment: 18 years. Maximum age for enrollment: 40 years.
The minimum contribution for Tier 1 and Tier 2 NPS accounts are INR. 6000 p.a and INR. 2000 p.a respectivelyThe amount to be contributed depends purely on the individual's age at the time of opting for the plan.
No limit on maximum contribution.Maximum limit on contribution is based on your age.
No limit on the maximum pension amount.The maximum pension limit of INR. 5000.

NPS vs Mutual Funds

National Pension SchemeMutual Funds
Offers liquidity but less than mutual funds.Offers high liquidity.
You are allowed to choose only one fund manager.no such restrictions on mutual funds.
Operational costs are less.Higher when compared to social security schemes.
Maximum age at entry is 60 years.No upper age limit.

NPS vs PPF

National Pension SchemePublic Provident Fund
NPS offers tax benefits up to Rs.1.5 lakhs under section 80CCD (1) of the Income Tax Provides only the announced interest rates for the fiscal year.
Act and up to Rs. 50,000 under section 80CCD(1B).-
Allows partial withdrawals subject to stringent conditions.Very few restrictions are imposed on partial withdrawals.
Allows partial withdrawals subject to stringent conditions.You can apply for loans against your accrued PPF balance.
You have an option to invest in equities and government securitiesYour return is based on a pre-declared announced rate.
Provides you an option to invest in equities and government bonds.Cannot close the account before maturity, i.e. 15 years from the date of enrollment
NRIs can invest in NPS.NRIs are not allowed to invest PPF scheme.

NPS Helpline

You can reach out to NPS customer care cell on their toll-free number or contact any of the NDSL branches for all information related to your NPS account.

NPS Toll Free Number: 1800222080 Mumbai Branch NSDL e-Governance Infrastructure Limited 1st Floor, Times Tower, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai- 400013 Phone: 022 40904242

Kolkata Branch 5th Floor, The Millenium, Flat No. 5W, 235/2A, Acharya Jagdish Chandra Bose Road, Kolkata - 700 020, Phone: 033 22814461/ 22901396

Chennai Branch 6A, 6th Floor, Kences Towers, 1 Ramkrishna Street, North Usman Road, T. Nagar, Chennai - 600 017 Phone: 044 2814 3917/18

New Delhi Branch 409/410, Ashoka Estate Building, 4th floor, Barakhamba Road, Connaught Place, New Delhi - 110 001 Phone: 011 23705418/2335381

Ahmedabad Branch Unit No. 407, 4th floor, 3rd Eye One Commercial Complex Co-op. Soc. Ltd., Above Vijay Sales Stores C. G. Road, Near Panchvati Circle, Ahmedabad - 380 006. Phone: 079 26461376

FAQs on NPS-National Pension Scheme

What is NPS?

Launched by the Pension Fund Regulatory and Development Authority (PFRDA) in 2004, National Pension Scheme is a retirement plan similar to a Public Provident Fund (PPF) or an Employee Provident Fund (EPF).

What is a New Pension Scheme?

The pension scheme offered by the Government of India is known as the National Pension Scheme (NPS) or New Pension Scheme.

What is NPS in Salary?

The amount deducted from your salary towards the NPS account along with the employer’s contribution constitutes NPS in salary. An employer's contribution to NPS qualifies for a tax deduction of up to 10 percent of the salary (basic plus DA) under Section 80CCD(2) of the Income Tax Act, 1961.

Procedures to check balance in National Pension Scheme statement online?

You can check your NPS account balance and transaction statement via both online and offline mode. For online mode, you need to log in to your NPS account through the CRA website (www.cra-nsdl.com). Submit your USER-ID and password. Once logged in, select Transaction Statement and then Holding Statement, which has all the details of your account balance in NPS fund.

What are the Interest rates offered by NPS?

The returns on NPS are totally market-related since your contribution is invested in equities and government bonds.

What are the tax benefits a subscriber can avail under NPS?

Contribution to the new pension scheme up to Rs.1.5 lakh is not taxed as per Section 80CCD (1), (1b) and (2).

How to register Online for NPS Scheme?

If you want to register online for an NPS scheme, you will have to visit the nearest POP-SP and submit your PRAN application and KYC documents. Your 1st contribution at the time of applying for registration to any POP-SP should be INR. 500 You can do the same via NSDL’s website.

Which body is responsible for the calculation of interest with regards to the NPS?

The Pension Fund Regulatory and Development Authority (PFRDA) is responsible for calculation of interest with regard to NPS.

KYC documents required to enroll for NPS through SBI?

The following documents are required to be submitted at the time of making the application - subscriber registration form, Photo ID proof, Proof for Date of Birth and Proof of residence.

What are the minimum contribution amounts for Tier I and Tier II accounts?

In a Tier-II account, the regulator has recently waived the requirement of annual minimum contribution of Rs 250 and minimum balance of Rs 2,000.

How many subscribers does NPS have?

The total number of NPS subscribers as on 30 Dec, 2016 is 1,02,76,250.

Who provides annuity on withdrawal or maturity under NPS?

The insurance companies licensed by the IRDA and authorized by the PFRDA act as the annuity service providers to NPS subscribers.

What is this Atal Pension Yojana?

The Indian government had launched the Atal Pension Yojana scheme with the aim of provide pension benefits to the unorganised sector of India.

Can NRIs invest in NPS?

Yes, NRIs can now open NPS Accounts online if they have an Aadhaar card or PAN card.

What is national pension scheme of Government of India?

The Government of India launched the National Pension System under the Pension Fund Regulatory and Development Authority (PFRDA) to provide pension and social security benefits to the citizens of India. Employees and employers both can contribute to the scheme.

Which agency will be responsible for contribution deductions in the event of the transfer of an employee during the course of the month?

It is the employer who is responsible for contribution deductions in the event of the transfer of an employee during the course of the month.

KYC documents required to enroll for NPS through SBI?

Subscriber desirous to join NPS can visit nearest registered State Bank of India branch for NPS and submit Registration Form & NPS Contribution Instruction Slip (NCIS) along with self-attested KYC documents, namely PAN and Aadhaar card.

Which is the best pension plan in India?

The following are considered the top 8 pension plans in India at present: LIC Jeevan Akshay 6 Plan, LIC Jeevan Nidhi Plan, SBI Life Saral Pension plan, HDFC Life - Click2Retire, HDFC Life - Assured Pension Plan, ICICI Pru - Easy Retirement, Reliance - Smart Pension and Bajaj Allianz - Pension Guarantee.

How to check the status of your NPS account in BOI?

NPS provides both online and app facilities for checking account balance and transaction statement. Log in to your NPS account through the CRA website (www.cra-nsdl.com). Submit your USER-ID and password. After logging in, select Transaction Statement and then Holding Statement, which gives the details of your accumulated balance in NPS fund.

What is NPS Tier 1 & 2?

NPS can be availed in the form of two accounts: Tier I and Tier II. Tier I is the retirement account which gets a host of tax breaks, whereas Tier II is a voluntary account which allows NPS subscribers to invest and take out money anytime. There are no withdrawal restrictions on a Tier II account. Since Tier I is a retirement account, you can withdraw the money only when you reach 60 years, as a lump sum withdrawal and a pension.

Can an NRI can join Atal Pension Yojana?

An NPS is open to both, resident Indians as well as NRIs for investment but only a resident India can join the Atal Pension Yojana.

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