National Pension Scheme
What is National Pension Scheme (NPS)?
The national pension scheme is a flexible, low-cost, and tax-saving retirement plan launched by the Government of India and regulated by the PFRDA (Pension Fund Regulatory and Development Authority). It is a voluntary contribution retirement savings scheme that seeks to inculcate the habit of saving for financially secure and stress-free post-retirement years amongst the citizens.
Individual savings are accumulated into a pension fund. PFRDA-regulated professional fund managers invest this fund into various classes, including government bonds, securities, bills, corporate debentures, and shares.
Your contributions to the NPS plan are accumulated until retirement and corpus growth continues via market-linked returns. You can choose superannuation or exit the plan before retirement. In both cases, you must purchase an annuity plan at maturity, with at least 40% of the accumulated contribution for lifetime pension income. You can withdraw the remaining amount as a lump sum.
National Pension Scheme Benefits
Low-cost investment
scheme
Fund management costs between 0.03-0.09% only. So, a significant amount of your contribution is saved for you and create great returns for your future retirement goal.
Higher Returns
Investment
Because a certain portion of the NPS goes into equities, you can expect much higher returns than other traditional tax-saving investments.
Best Tax Saving
Benefits
The Tier-1 NPS account extends tax benefits of up to Rs. 2 Lakhs as per Section 80C of the IT Act. You can also claim a surplus income tax deduction of Rs. 50,000 under Section 80CCD.
Flexible Investment
Option
You can choose from diversified investment options and may even make partial withdrawals before retirement during emergencies. You can also switch your fund manager once a year.
National Pension Scheme Investor Eligibility
Indian citizens, including both government and corporate employees (except army personnel), may choose the NPS scheme. However, at the time of account creation, they must fulfil these criteria:
- Their age must be between 18 and 70 years.
- All documents listed in the Subscriber Registration Form (SRF) must be submitted. Non-compliance will lead to application cancellation.
- For government employees: A contribution of 10% of the salary goes to the NPS plan with an equal contribution (14% for central government employees) by the government.
- Corporate employees enrolled by their employers must fulfil KYC requirements to be eligible for the NPS scheme.
Types of NPS Accounts
Tier – 1 (Pension Account) | Tier – 2 (Investment Account) |
Compulsory for NPS subscribers | Can be opened voluntarily |
Minimum Rs. 500 every year | Minimum Rs. 1000 every year |
Tax benefits of up to Rs. 2 Lakhs yearly | No tax benefits |
Withdrawal not permitted | Withdrawal permitted |
No maximum limit | No maximum limit |
FAQ's - Fixed Deposits
The NPS scheme is a retirement plan launched by the Indian Government to ensure financially secure, enjoyable, and stress-free post-retirement years. The most important NPS scheme benefits include high return, lost-cost investment, multiple investment options, a diversified portfolio, and a steady flow of pension after retirement.
The steps to invest in the NPS plan online are:Select your investment account.
- Choose a fund manager and the investment style.
- Enter the amount of money you want to pay annually.
- Verify your application form.
- Complete the payment.
The Divadhvik team is here to guide your investment in NPS online for maximum returns and tax benefits.
In this case, you will continue to be subscribed to the NPS up to the age of 75 years.
The accumulated sum will be paid to the nominee(s) or legal heir of the plan holder.
Yes, NRIs can also open an NPS account in India. Their contributions are subject to regulatory requirements by RBI and FEMA.
As per regulatory guidelines, HUF, PIO, & OCI cannot subscribe to NPS.
