National Pension System

National Pension System (NPS) is an easily accessible, low cost, tax-efficient, flexible and portable retirement saving scheme. NPS is designed on contribution basis wherein the subscriber contributes to his own retirement account. The benefit subscribers ultimately receive depends on the amount of contribution, the returns made on the contributions and the period of contributions.

Contribution + Investment Growth – Charges = Accumulated Pension Wealth

(individual contribution)

Who are eligible to open NPS account?

Any citizen of India – Resident or Non-resident, in the age group of 18 to 60 years can open NPS account.

What are the feature of NPS?

Ø  Every individual subscriber is issued a Permanent Retirement Account Number (PRAN) card which has 12 digit unique number.

Ø  Two Types of Sub-accounts under NPS

o   Tier- I account: - This is a permanent retirement account in which subscriber contributes for accumulation of pension wealth.

o   Tier – II account: - This is a voluntary saving facility available as an add-on to any Tier – I account holder. Subscribers will be free to withdraw their saving from this account whenever they wish.

Ø  Regulated : The fund are managed by Pension fund appointed and actively monitored and regulated by PFRDA, the Regulator set up through an Act of Parliament.

Ø  Portable and Technology Driven: On joining the NPS, a subscriber gets a Permanent Retirement Account Number (PRAN) to which all his/her contributions are credited and it is portable across geographies and employments. It being technology driven, subscribers can view their accounts online

Ø  24 X 7 X 365 Access: Riding on a highly efficient technological platform NPS provides online access to account to the subscribers. Subscribers can also access account through NPS mobile App.

Ø  Very Low Cost Structure: The investment cost is very low as compared to other investment products available to market.

Ø  Choice: Active choice/Auto choice:

o   Active choice - investment mix has to be chosen by the individual.

o   Auto choice -  investments will be made based on the age of account holders

Ø  Diversified Portfolio: Judicious mix of investment instruments and asset classes like equity (E), corporate Bond (C) Government Security (G) and Alternate Assest Class (A) ensures optimum returns on investment and have minimal impact on the impact on the returns on subscriber’s contributions even if there is a market downturn. The individual subscriber has a choice of selecting investment mix (E,C,G,A), as per his/her risk appetite. Two new life cycle funds LC 75 (Aggressive) and LC 25 (Non-Aggressive) deciding the equity portion of the investment have been introduced.

(Also Read: Public Provident Fund)

How and where to open NPS account ?

Account can be opened through:

1. e-NPS (NPS Online)

To make the account opening under NPS hassle free, facility has been developed where you can open NPS account online if you have

(i) Aadhaar Card, or

(ii) PAN card with account with internet banking facility in one of the  empanelled bank undertaking KYC verification online.

e-NPS Charge

For transaction through e-NPS, service charge of 0.5% of the contribution amount ad valorem, subject to minimum of Rs. 5/- and maximum of Rs. 5,000//- per transaction would be recovered from the subscribers. The service charges would be rounded off to the nearest rupee and services tax & cess thereupon on services charges would be on actual basis. Charges for all other intermediaries remain the same.

2. Points of presence

The account can be opened through any of the Point-of Presence (POPs) registered with PFRDA by submission of application form.

Contribution Requirement

Particular	Tier I	Tier II
Min Contribution at the time of account opening	Rs. 500/-	Rs. 1000/-
Min amount per contribution	Rs. 500/-	Rs. 500/-
Min Total contribution in the financial year	Rs. 1000/-	-
Min frequency of contribution ( no max limit)	1 per year	1 per year

Tax Benefits and Implications

Tax benefits are available on both employee and employer contributions. The employee can save tax on his own contribution [u/s 80 CCD (1) of IT Act] as well as the contribution made by employer [u/s 80 CCD(2)]

For employee, deduction from taxable income is available upto 10% of salary (Basic + DA) – u/s 80 CCD(1) of IT Act 1961, subject to overall ceiling of Rs. 1.50 Lakh u/s 80 CCE of IT Act 1961.

Additionally, if employer, is also contributing towards pension accounts of the employee, an additional deduction of 10% of salary (Basic + DA) is available to the employees u/s 80 CCD(2).

Furthermore, the employer can claim these contributions upto 10% of salary (Basic + DA) for each employee without any overall limit for all employees as a Business Expense u/s 36(1) iv of IT Act.

Additional Tax benefit

Subscriber is allowed extra tax deduction in addition to the deduction allowed under Sec. 80 CCD (1) for additional contribution in his NPS account subject to maximum of Rs. 50,000/- under sec. 80 CCD 1 (B) of IT Act, 1961.

Please visit www.pfrda.org.in / www.npstrust.org.in / www.enps.nsdl.com