NATIONAL PENSION SCHEME

NATIONAL PENSION SCHEME

In the year 2004, the Government introduced a scheme called “National Pension Scheme” for salaried people.


Overview

This scheme is said to be an alternative to the Employee Provident Fund (EPF) scheme. And in the year 2009, the scheme became applicable to each and every person of India. The National Pension Scheme aims to provide retirement benefits to the entire Indian citizen, which also includes the unorganized sectors.

The scheme allows individuals to contribute on a regular basis in a pension account during their employment period. The individuals can withdraw a part of the amount in a lump sum at the time of retirement, and use the remaining amount to buy an annuity in order to secure a regular income after retirement.
 

What is the National Pension Scheme (NPS)?

National Pension Scheme is a type of pension cum investment scheme which is launched to provide security after the retirement to the entire Indian citizen.
 

Who are eligible for the National Pension Scheme (NPS)?

Any Indian citizen aged between 18 to 65 years is eligible for NPS. To take the benefit of NPS, the eligible people have to comply with know your customer (KYC) norms.
 

Who regulates the National Pension Scheme?

NPS is regulated by Pension Fund Regulatory and Development Authority (PFRDA).
 


 

What are the advantages of the National Pension Scheme (NPS)?

The National Pension Scheme has the following advantages-
 

Advantages
Low-cost product
Tax benefits for Individuals, Employees, and Employers
It provides attractive market-linked returns
Easily portable
It is managed in a very professional manner by experienced Pension Funds
PFRDA, as set up by an act of parliament, regulates NPS

 

Can a Non- Resident Indian (NRI) avail the benefits of NPS?

Yes, Non- Resident Indian (NRI) can avail of the benefits of NPS, provided they have any identity proof such as a passport. As prescribed by RBI and FEMA, NRI contributions are subject to regulatory requirements.
 

Is there any limit on the contribution to the NPS account?

There is no such limit towards the contribution made to the NPS account. Any amount can be invested in the NPS account.
 

What are the tax benefits for NPS?
  1. In case of employee’s own contribution - tax deduction is applicable up to 10 percent of the basic salary plus DA under Section 80CCD (1) of the Income Tax Act within the limit of Rs 1.5 lakhs as allowed under Section 80C and Section 80CCE.
     
  2. Contribution by the employer to the NPS account is exempted under Section 80CCD (2).
     
  3. In some cases, individuals can claim an additional deduction under Section 80CCD (1B) of up to Rs 50,000, which is in addition to the limit Rs 1.5 lakhs as per Section 80C.
     
  4. Under Section 80CCD (1), a self-employed person can also contribute 10 percent of his gross income in the NPS account.
     
How to open an NPS account?

The NPS account can be opened either by online mode or by offline mode

  • If anyone wants to opt for online mode then they have to visit the NSDL site https://www.npscra.nsdl.co.in/steps-to-join-nps.php. The applicant has to provide all the necessary information as asked on the website in order to join the NPS.
     
  • In case the subscriber opts for offline mode, the government has nominated many entities and they are called Point of Presence (POP) which include various nationalized banks as well as private banks.

    Moreover, entities such as the Indian Postal Department, Stock Holding Corporation, UTI Asset Management Company, and UTI Technology Services Limited, etc. have also been assigned for the purpose of opening an NPS account.

    These entities have further nominated a few branches as Point of Presence - Service Providers (POP-SPs)
     
How does the NPS account works?
  1. After the successful enrolment, the subscriber will be allotted a Permanent Retirement Account Number (PRAN) under NPS. 
     
  2. NSDL-CRA (Central Record Keeping Agency) after the generation of PRAN, sent an email alert as well as a SMS alert to the registered email ID and mobile number of the subscriber.
     
  3. Subscriber contributes regularly towards the NPS account during the employment period to create a lump sum amount for retirement. 
     
  4. After retirement, the amount is made available to the Subscriber and will also have the option to invest some amount to the Annuity scheme in order to provide a monthly pension post-retirement.
     
Can an Individual have more than one NPS account?

No, individuals cannot have more than one NPS account.
 

Edited by Minu Mishra

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