About NPS
The National Pension System is a retirement saving scheme launched by the Government of India through which you can voluntarily invest your money on a regular basis to build a retirement corpus. NPS is a low-cost investment solution that lets you invest across asset classes and offers a host of tax benefits for individuals (under Section 80C and Section 80CCD). NPS is regulated by PFRDA i.e. Pension Fund Regulatory & Development Authority.
Features & Benefits of NPS
Affordable – One can invest as low as 1000 per year to open and maintain NPS account
Tax Efficient – One can avail tax benefit upto Rs.1,50,000/- u/s 80C and additionally can invest Rs. 50,000/- and avail tax deduction on this investment u/s 80CCD (1B)
Flexible Investment Options – One can switch investments between equity, government or corporate bond & alternative investment.
Flexible Withdrawal – Partial withdrawal, pre mature exit etc. available subject to terms & conditions.
Low Cost – NPS is run on very low cost which is monitored by PFRDA.
Types of NPS Account – There are two types of NPS account:
Tier 1 Account – It is mandatory to open tier I account for having an NPS plan. Withdrawals from this account are conditional. Contribution to this account are eligible for deduction u/s 80C & 80CCD(1B).
Tier II Account – Those who have tier I account can also open tier II NPS account for emergency need. Withdrawals are allowed anytime without any limit. Contributions to this account are not eligible for any tax deduction.
Withdrawals & Maturity
Partial Withdrawals – Allowed after 3 years of account opening upto 25% of contribution. Only 3 such withdrawals are allowed in the lifespan of the account. Withdrawals are tax free.
Pre-Mature Exit – Allowed after 5 years of account opening upto 20% of corpus. For balance amount the subscriber has to buy an annuity. Amount received as lumpsum is tax free and annuity is subject to tax as per tax slab.
Exit at Maturity – Exit at 60 is considered as exit at maturity. Upto 60% of corpus is allowed as withdrawal and for balance 40% of corpus the NPS subscriber has to buy an annuity. Amount received as lumpsum is tax free and annuity is subject to tax as per tax slab.
Death Benefit – Entire corpus can be claimed by legal heir or nominee upon death of NPS subscriber. Entire amount is tax free.
Frequently Asked Questions
Can i have more than one NPS account?
No, multiple NPS accounts for a single individual are not allowed and there is no necessity also as the NPS is fully portable across sectors and locations.
Can an NRI open NPS account?
Yes, an NRI can open an NPS account. Contributions made by NRI are subject to regulatory requirements as prescribed by RBI and FEMA from time to time. If the subscriber’s citizenship status changes, his/her NPS account would be closed.
How and where can i open an NPS account?
NPS is distributed through authorized entities called Points of Presence (POPs) and almost all the banks (both private and public sector) are enrolled to act as Point of Presence (POP) under NPS apart from several other financial institutions. To invest in NPS, you will be required to open a NPS account through the Point of Presence (POP) and who will assist the subscriber in opening the account including the filling up of necessary forms, providing the information about NPS and any other relevant information in this regard.
What are the documents required for opening an NPS acount?
The following documents need to be submitted to the POP for opening of a NPS account: a. Completely filled in subscriber registration form b. Proof of Identity c. Proof of Address d. Age/date of birth proof.