Make Use of the National Pension System (NPS) for a Secure Retirement Life

If you are looking for easy access, flexible and portable retirement savings account, National Pension System, also known as National Pension Scheme or NPS, is the best bid for you. NPS investment is a low-cost tax efficient (u/s 80C & 80CCD) savings instrument launched by the Central Government of India & regulated by Pension Fund Regulatory and Development Authority (PFRDA). National Pension Scheme offers a robust and transparent platform to achieve your retirement goals cost-effectively. Invest for national pension scheme online from an early age so that you can save enough to fulfill all your retirement wishes!

INVESTMENT IN NATIONAL PENSION SCHEME

WHY SHOULD YOU BEGIN EARLY TO INVEST IN NPS PENSION SCHEME?

The most common question that people ask is ‘How to invest for retirement at age 35’ or ‘How to invest for retirement at age 50’ while the right question to ask is ‘When to invest for retirement’ and the best answer is ‘Right NOW’, because the sooner you start the better you are able to plan your investments in order to retire rich.

The following example shows how an early start requires a lesser investment amount to create a corpus of Rs. 1 Crore.

If you start at Age 25

Invest Monthly 

Pension Wealth at Age 60 will be

1,14,84,830

If you start at Age 30

Invest Monthly

Pension Wealth at Age 60 will be

1,13,96,627

If you start at Age 40

Invest Monthly

Pension Wealth at Age 60 will be

1,14,85,454

*Note

For a monthly investment of Rs. 4,000 in NPS pension scheme with an expected return of 10% & 6% on annuity after retirement.

The NPS returns calculations and the figures as displayed are indicative only excludes applicable charges.

Tax laws may change, affecting the Return On Investment (ROI).

NPS VS PPF

ELIGIBILITY AGE
Between 18 - 65 Between 18 - No upper limit
MINIMUM AMT. TO INVEST P.A.
Minimum investment per year is Rs.1000. Minimum investment per year is Rs.500.
TAX BENEFIT
Tax Benefit up to Rs. 2,00,000 available per financial year.
Contributions up to Rs. 1,50,000 are exempted u/s 80CCD(1).
Additionally, contributions up to Rs.50,000 are exempted u/s 80CCD(1B).
Tax Benefit up to Rs. 1,50,000 available per financial year.
Contributions up to Rs. 1,50,000 are exempted u/s 80C.
CHOICE OF ASSETS / FUNDS
Can choose to divide investment into 3 types of funds namely - Equity, Corporate Bonds & Government Securities No choice. Everything is invested in Government Securities only.
AVAIL ANNUITY (PENSION) FACILITY
Yes No
LOAN FACILITY
No Yes
NRI’S CAN INVEST
Yes No
INVESTMENT MANAGEMENT CHARGES
0.01% p.a. 0%
PREMATURE WITHDRAWAL
Before Age 60: Up to 20% of Corpus can be withdrawn in lump sum Balance amount needs to be invested in Annuity
After Age 60: Up to 60% of Corpus can be withdrawn in lump sum Balance amount needs to be invested in Annuity
Can be made from the start of the 7th financial year
Complete withdrawal done only at maturity i.e. after 15 yrs.
REGULATED BY
Pension Fund Regulatory and Development Authority (PFRDA) Government of India

NPS VS ELSS

ELIGIBILITY AGE
Between 18 - 65 No minimum or maximum limit. Minor accounts can be opened.
MINIMUM AMT. TO INVEST P.A.
Minimum investment per year is Rs.1000. Minimum investment per year is Rs.500.
TAX BENEFIT
Tax Benefit up to Rs. 2,00,000 available per financial year.
Contributions up to Rs. 1,50,000 are exempted u/s 80CCD(1).
Additionally, contributions up to Rs. 50,000 are exempted u/s 80CCD (1B).
Tax Benefit up to Rs. 1,50,000 available per financial year.
Contributions up to Rs. 1,50,000 are exempted u/s 80C.
CHOICE OF ASSETS / FUNDS
Can choose to divide investment into 3 types of funds namely - Equity, Corporate Bonds & Government Securities No choice. Everything is invested in Equity only.
AVAIL ANNUITY (PENSION) FACILITY
Yes No
LOAN FACILITY
No No
NRI’S CAN INVEST
Yes Yes
INVESTMENT MANAGEMENT CHARGES
0.01% p.a. 1.90% to 3% p.a.
PREMATURE WITHDRAWAL
Before Age 60: Up to 20% of Corpus can be withdrawn in lump sum Balance amount needs to be invested in Annuity
After Age 60: Up to 60% of Corpus can be withdrawn in lump sum Balance amount needs to be invested in Annuity
Complete withdrawal done only at maturity i.e. after 3 yrs.
REGULATED BY
Pension Fund Regulatory and Development Authority (PFRDA) Securities and Exchange Board of India (SEBI)

HOW YOUR MONEY IS INVESTED FOR RETIREMENT?

Get a choice of 3 funds to invest in NPS along with an option to manage your investments on your own through “Active Choice” or have it will be managed by an automated module i.e. “Auto Choice”. Read more

WITHDRAWAL RULES FROM NPS

Know how you can make partial withdrawals from your national pension scheme fund or exit from the scheme before as well as after retirement. Read more

NPS CORPORATE SECTOR

A customized version of NPS to suit various organizations so that employee needs for retirement planning are met.

NPS ARCHITECTURE

 View

*Tax benefit is for indicative purpose only. The tax benefits are calculated considering that income is chargeable to tax at the highest slab of 30.9% till retirement and that the investor invests a minimum of Rs. 50,000 per annum in NPS. It is based on the input provided by the user and may vary based on the same. All calculations are made upon the assumption that the conditions mentioned in the relevant sections of the Income Tax Act, 1961 are met. Tax laws can change and be amended from time to time. The information that is contained in this calculator does not comprise of legal advice or tax advice. Users are advised to consult their tax advisors before making any decision and/or taking any action. The company will not be responsible for any kind of loss or damage done to any one, of any kind, in any manner that arises from the decisions and/or actions taken based on the information contained in this calculator.

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FAQs – National Pension System

Here are the terms you need to know with regards to NPS before reading more on the National Pension System:

  1. POP – Point of Presence
  2. POP-SP – Point of Presence – Service Provider
  3. PFRDA – Pension Fund Regulatory and Development Authority
  4. PRAN – Permanent Retirement Account Number
  5. CRAs – Central Recordkeeping Agencies
  6. PFM – Pension fund managers
  7. ASP – Annuity Service Providers
  8. KCRA – Karvy Computer Shares Pvt Ltd
  9. AIF – Alternative Investment Funds
  10. KYC – Know Your Customer
  11. AUM – Assets Under Management
  12. PAN – Permanent Account Number


What is NPS?

National Pension System (NPS) is a scheme allows subscribers to contribute regularly in a pension account during their working life. On retirement, subscribers can withdraw a part of the corpus in a lump sum and use the remaining corpus to buy an annuity to secure a regular income after retirement. NPS investment is an easily accessible, low cost, tax-efficient, flexible, and portable retirement savings account.


Who can join National Pension Yojana?

Any Indian citizen (resident or non-resident), subject to the following conditions, can join the NPS Scheme:
*On the date of application to the POP/POP-SP, the applicant must be in the age bracket of 18 – 65 years.
*The applicant Indian citizen can either join the NPS as an individual or a corporate. However, this is subject to submission of all the required information and Know your customer (KYC) documentation.


Can an NRI open an NPS account?

Yes, An NRI can open an NPS account. However, the contributions made by NRI will be subject to regulatory requirements prescribed by RBI and FEMA. Moreover, if the Indian citizenship status of the NRI subscriber changes, their National Pension System account would be closed.


Can HUF, OCI and PIO join NPS?

No.HUF, OCI, and POI are not allowed to join the National Pension Scheme.


How do I open a NPS account?

You can open NPS account online. NPS is distributed through authorized entities called Points of Presence (POPs). One will have to open a NPS account with a POP to invest in NPS. The POP will provide the subscriber with all the help with regards to account opening. One can enrol online as an individual subscriber with Aadhar using the following steps:
1)Visit: https://accountopening.investmentz.com/AcmiilService/Karvy/Registration
2) Select Applicant Type: Individual Subscriber, Status of Applicant: Resident of India, and Select Account Type as per your preference (Tier 1 – is Pension Account & Mandatory) (Tier 2 – is Saving Account & Optional), Enter Aadhaar number and OTP
3) Next, you fill all your details and make your initial contribution online. Please make a note of the Acknowledge Number given at the time of registration. With the help of acknowledge number, a subscriber can check the status of the application.
4) Upon successful registration, the subscriber will receive a welcome kit within 10 working days. The welcome kit will contain: PRAN card (Permanent Retirement Account Number is a unique registration number allotted to each subscriber in the CRA system), subscriber information, and product information.


What uploads are required to be made for online opening of the Individual Pension Account under NPS?

An individual opening the Individual Pension Account using the online NPS platform (https://accountopening.investmentz.com/AcmiilService/Karvy/Registration) will have to upload the scanned photograph and signature in *.jpeg/* format with file size ranging between 4-12kb. However, this is optional for individuals opening a national pension scheme online with Aadhaar details.


Can I appoint nominees for the NPS Tier I and Tier II Account?

Yes. You are required to appoint a nominee while opening your NPS account online. This has a clearly specified section in the account opening form, which allows you to appoint up to 3 nominees for NPS Tier I and Tier II account. In case you make a nomination, you are required to specify the percentage of your savings that you wish to allocate to each of the nominees, with total aggregating to 100% of your total savings.


Can I change the Nominees for my National Pension Scheme NPS Accounts?

Yes. Nominees in your NPS Tier I account can be changed at any time after receiving your PRAN.


Does Subscriber need to deposit any minimum amount at the time of submission of NPS application form?

The following table provides the complete information on the minimum contribution requirements:

However, to avail of tax benefit u/s 80CCD (1B), you can deposit Rs. 50, 000 at once in your Tier I Account.


At what stage of the online process will I be able to know that my online NPS application has been accepted and I have been allotted a Permanent Retirement Account Number?

Upon successful registration of NPS account online and completion of online payment, the applicant will receive an online receipt, after which the Permanent Retirement Account Number (PRAN) will be generated. The subscriber will receive SMS and email alerts.


What happens after successful NPS registration? What intimation does the subscriber receive?

After successful NPS investment account registration, the PRAN kit (consisting of PRAN Card, Subscriber’s data and Information booklet) will be dispatched to the subscriber at his correspondence address. The T-Pin and I-Pin are sent separately to the registered address.


What is PRAN Card?

PRAN is the Permanent Retirement Account Number for your National Pension System account. It is a unique registration number allotted to each subscriber in the CRA system. This number will remain with the subscriber as long as he/she remains a subscriber in the NPS system. Moreover, it will not change despite the contributor moving to a new job or another location owing to transfer. PRAN is used to identify all the transactions relating to a subscriber.


When will the NPS contribution paid online get reflected in my PRAN?

Online National Pension Scheme contributions normally take around 3-4 working days to get reflected in your PRAN.


What are different types of NPS Account?

Under NPS, a subscriber can open two types of accounts – Tier I and Tier II. A Tier I account is mandatory to open to join the NPS. Difference between Tier I and Tier II accounts are as mentioned below:


Can I have more than one NPS account?

No. You are not allowed to have multiple NPS accounts as an individual, especially since NPS is highly portable across sectors and locations, which doesn’t create the need to have multiple accounts.


Is it mandatory to open Tier II NPS Account at the time of opening Tier I NPS Account?

No. It is an optional account, which you can open at a later date.


What happens if the minimum annual contribution of Rs.1,000 is not invested in Tier - I NPS Account?

The PRAN gets frozen in case the subscriber fails to contribute minimum Rs.1000 in his/her Tier - I NPS Account. This will not allow the subscriber to perform any transaction in Tier - I and Tier - II NPS Accounts.


What is the process of unfreezing the PRAN?

This can be done by paying Rs.500 as minimum contribution amount and Rs.100 as a penalty. You will need to add the POP charges as well.


How many funds are there in NPS?

NPS offers 3 funds options to subscribers

  • Equities (E)
  • Corporate Bonds (C)
  • Government Securities (G)
The NPS investment towards equity funds us restricted to 50% of the contribution amount for Tier I and Tier II NPS Accounts. However, the subscriber can invest up to 100% in corporate bonds or government securities fund.


What are the different Fund Management Schemes available to the subscriber?

The NPS provides its subscribers with the flexibility of investing in its schemes through the following two approaches:

Active choice

–This option allows the subscriber to decide the asset classes in which he intends the contributed funds to be invested along with their respective percentages (Asset class E, Asset Class C, and Asset Class G).

Auto choice

–This option allows the subscriber to choose from three lifecycle funds –

Aggressive Life Cycle Fund (LC75), Moderate Life Cycle Fund (LC50),and Conservative Life Cycle Funds (LC25)

.Lifecycle funds enable automatic management of invested funds of the subscriber based on his/her age. Moderate Lifecycle Fund (LC50) is the default option under NPS.


Which are the Pension Fund Managers available for NPS?

Following are the six Pension Fund Managers that NPS allows you to choose from currently:

  • Aditya Birla Sunlife Pension Management Limited
  • HDFC Pension Management Company Limited
  • ICICI Prudential Pension Funds Management Company Limited
  • Kotak Mahindra Pension Fund Limited
  • Reliance Capital Pension Fund Limited
  • SBI Pension Funds Private Limited
  • UTI Retirement Solutions Limited
  • LIC Pension Fund Ltd.


Are there any guaranteed returns provided under NPS?

Returns from NPS investment are market-linked and depend on the performance of Equity, Corporate Bonds, and Government Securities funds, which helps build the corpus.


Can a Subscriber change the fund allocation pattern under Active Choice?

Yes. That can be done, but only twice in a given financial year.


Can a Subscriber switch between Active Choice and Auto Choice?

Yes. That’s the added flexibility a subscriber enjoys. Again, this can be done twice in a given financial year.


Can Subscriber increase or decrease the contribution amount in subsequent years?

Yes. NPS provides its subscribers with the flexibility to alter their contribution amounts as per their suitability.


Can a Subscriber use 100% of accumulated wealth to buy annuity plan?

Yes. You can use it for buying an annuity plan.


Will the subscriber get any account statement relating to his investment to NPS?

Subscriber will receive a statement of account at the registered address once a year. This will list out all the details of contributions, investment, unit balances, NAV, and charges deducted. Moreover, the subscriber can always login to view the Statement of Account.


Does NPS subscriber get any alert on credit of contribution amount to his/her NPS accounts?

Yes. The subscriber will receive email and SMS alerts to their registered email ID and mobile number once the contribution gets credited to the NPS account.


What are the tax benefits available to subscribers for contribution under the corporate model?

Following are the tax benefits available to subscribers on their contributions:


Is partial withdrawal allowed from Tier I NPS Account?

Yes. A subscriber can withdraw up to 25% of the contributed amount from the Tier - I NPS Account after 3 years. Moreover, the subscriber can withdraw twice from the Tier I NPS Account after a gap of 5 years from the first withdrawal.


What are the conditions of partial withdrawal?

A subscriber is allowed to withdraw from Tier - I NPS Account only for specific purposes such as child’s marriage, higher education, and treatment of critical illnesses.


When can a Subscriber exit from National Pension Scheme, NPS?

A subscriber can exit from NPS investment account after 10 years of account opening or attaining 60 years of age whichever comes first.


How the pay-out happens if a subscriber exits from NPS?

The NPS has imposed restrictions on lumpsum amounts being made accessible to subscribers on exit, which are mentioned below: Upon attainment of the age of 60 years:

  • At least 40% of the accumulated pension wealth of the subscriber needs to be utilised for the purchase of annuity providing for a monthly pension to the subscriber
  • The balance is paid as lump sum payment to the subscriber
  • However, the subscriber has the option to defer the lump sum withdrawal until the age of 70
At any time before attaining the age of 60 years:
  • At least 80% of the accumulated pension wealth of the subscriber needs to be utilized for the purchase of annuity providing for a monthly pension to the subscriber
  • The balance is paid as a lump sum payment to the subscriber
Death of the subscriber:
  • The entire accumulated pension wealth (100%) would be paid to the nominee/legal heir of the subscriber
  • There would not be any purchase of annuity/monthly pension.


What are the other charges under NPS?


What is meant by Non–Financial Transaction?

Non-financial transactions include change of address, contact details, and change/addition of nominee.

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