The National Pension System (NPS) is a retirement benefits programme operated by the Government of India to provide subscribers with a steady income after retirement. The PFRDA is responsible for managing the NPS. Pension Fund Regulatory and Development Authority is the acronym for PFRDA.
Benefits and Advantages
Every subscriber to the National Pension System (NPS) is assigned a unique Permanent Retirement Account Number (PRAN). To encourage people to save, the Indian Government has made the NPS plan secure and provided account holders with attractive perks.
PFRDA (pension fund regulator within the Ministry of Finance, Government of India) regulates the NPS, ensuring transparency regulations controlling the activities. The NPS Trust regularly monitors compliance with the rules to ensure compliance.
NPS is a voluntary programme for all Indian citizens. You can contribute any amount at any moment to your NPS account.
You have the option to choose or alter the Point of Presence (POP), investment plan and fund manager. This ensures that you receive the highest possible returns based on your comfort level with stocks, bonds, government securities, and alternative assets.
NPS is one of the most cost-effective investment plan options accessible.
The NPS account or PRAN will stay unchanged regardless of changes to employment, city, or state.
Those with an NPS account may transfer their retirement funds tax-free to their NPS account.
NPS provides triple tax advantages, including the following:
Tax advantages for salaried individuals
Under section 80CCD, you can claim tax exemption on up to 10% of your basic pay plus dearness allowance, up to Rs. 50,000. This benefit exceeds the section 80C limit of Rs. 1,50,000 and claims tax exemption on the invested amount.
*Employer contribution benefits for NPS, PF, and retirement contributions are restricted at 7.5 lakhs.
For self employed
You can invest up to 20% of your gross annual income to claim tax exemption subject to a maximum amount of Rs. 1,50,000 , according to section 80C of the Income Tax Act of 1961.
The method for opening a NPS account
Through the websites of participating banks, you can enrol in the NPS in a paperless manner from the comfort of your home or office. The scheme’s primary purpose is to provide all Indian residents with an attractive long-term savings vehicle for retirement planning, with market-based returns that are both safe and reasonable. All Indian nationals between the ages of 18 and 70 can open the account.
Instructions for opening an online NPS account
- Under NPS, select the “Apply Now” option (National Pension System).
- You have the option of opening the account with either K-Fin Technologies Private Limited or NSDL.
- Complete the form’s required fields.
- The registration (account creation) process will generate an acknowledgement on the basis of the search for the acknowledgment number; there will be an option to submit the registration form later, but within 15 days.
- The bank will validate the KYC information they have in their records.
- Compare your Aadhaar to the UIDAI database to ensure its legitimacy.
- You need to submit scheme details.
- You must supply the details of the nominee.
- Upload your photo, specimen signature, cancelled check/bank statement/passbook copy, and PAN copy.
- Through the Net Banking or payment gateway facility, you can make a minimum deposit of Rs. 500.
- A 12-digit PRAN will be generated and assigned to you upon payment success.
- PRAN will be sent to you by your registered email and SMS number.
If the NPS corpus is less than Rs. 2,00,000, the individual may withdraw the full amount in a single lump sum. A member has to wait until they are 70 years old to withdraw a lump payment from account of NPS.
NPS gives better returns than other financial products such as Public Provident Fund. It offers many investment options to subscribers to indicate where their funds are to be invested. The NPS lessen the retirement responsibility on the government.