National Pension Scheme (NPS)
A Low-Cost Investment Option With Tax Redemption Benefit.
National Pension System (NPS) is an easy to access, low-cost, flexible, and portable retirement savings account which offers tax benefits under Section 80C and Section 80CCD.
Invest in National Pension Scheme.
Benefits of NPS
Some key benefits include:
- The greater the value of the contribution made, the greater the investment achieved.
- The longer the term over which the fund accumulates and lower the charges deducted.
- The larger would be the eventual benefit of the accumulated pension wealth likely to be.
How to Join NPS?
- A subscriber can opt for either PAN or Adhaar based registration.
- PAN: You must have a ‘Permanent Account Number’ (PAN) or and an active Saving / Current account with any of the registered Banks (for KYC verification and initial payment through Internet Banking) to complete the registration process using this option.
- Initial contribution needs to be done through the Internet Banking facility of the bank selected by the subscriber during the online application process. The same bank will be responsible for KYC authentication in NPS.
- Aadhaar: The user must have Aadhaar number with registered mobile number.
Save Additional Tax.
Contributions made in National Pension Scheme are eligible for additional tax deduction benefit on voluntary contribution of up to Rs. 50,000/-under section 80CCD (1B), over and above Rs.1,50,000/-u/s 80C.
Assortment of Investment Options.
The two investment models offered are Auto or Active options.
As per risk appetite user can choose, the funds are allocated under
- Equity (E),
- Corporate Bonds (C),
- Government securities (G), and
- Alternate Assets (A)
Long – Term Returns:
NPS is a long-term investment plan which draws benefits based on compounding.
There is a minimum lock in period of 10 years for All Citizens/Corporates.
Market Based Returns
NPS returns are dependent on the asset allocation amongst Equity (E), Corporate Bonds (C), Government Securities (G) and Alternate Investment Funds (A) and are directly linked to the market as per the market returns
Types of NPS Accounts
| Tier I | Tier II | |
|---|---|---|
| Status | Mandatory | Voluntary |
| Withdrawals | Restricted | Permitted |
| Min Initial Contribution | ₹ 500 | ₹ 1000 |
| Min Subsequent Contribution | ₹ 500 | ₹ 250 |
| Max NPS Contribution | No Limit | No Limit |
Two Types Of NPS Accounts
Understanding Tier I & Tier II
The Pension Scheme offers subscribers mainly two account types known as Tier I account and Tier II account. While Tier I account is mandatory for joining NPS, Tier II account is optional and can be opened at any point of time –at the time of opening Tier I account or later.
Tier-I /Pension Account is a long-term Permanent Retirement Account in which the subscriber invests for the long term and earns pension at the time of retirement.
On the other hand, Tier-II or Investment Account is a voluntary short-term investment account.
Tier I account is mandatory for opening a Tier II account. There are no restrictions on withdrawals from Tier-II accounts.