Investment Plans 3736 views September 24, 2020

National Pension Scheme(NPS)

Many individuals are worried about their life after retirement. Therefore, it is better to start planning for your retirement at an early age so that you will not have to face any financial problem after your retirement. So the government has introduced the National Pension Scheme in which you can make a contribution at an early age and accumulate funds for your retirement. In this scheme, you are allowed to make partial withdrawals up to 60% of the maturity corpus as lump-sum and the balance amount is invested to annuities. Now, you must go through some of the features and benefits of this scheme. See how you can enjoy tax benefits under the National Pension Plan.


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Exclusive Features of National Pension Scheme

  1. There is no geographical restriction of opening an NPS account as you can open and manage it in all over India.
  2. You are free to choose the fund manager, investment option, and annuity service provider as per your needs.
  3. This scheme allows you to manage funds on your own.
  4. This is one of the cheapest investments that can help you to accumulate funds for your retirement.
  5. NPS is voluntary for the citizens of India except for the state and government employees.

Types of NPS Accounts

There are four types of NPS Account available and you can easily differentiate among them once you go through all of them.

Individual NPS Account

In this account, the account holder is the only contributor to the pension scheme. The individual is free to choose the investment options and schemes as per his choice. Any individual who is a citizen of India can voluntarily open this account and he can also enjoy tax benefits on this investment.

Corporate NPS Account

This account is usually opened by corporate companies or by the employers for the employees. In this account, both employees and employers make contributions to the NPS scheme. The employer’s contribution must not exceed 10% of the employee’s basic salary and dearness allowances.

Tier 1 Account

In this account, the contributions made are eligible for additional tax deduction benefit of up to Rs.50000 as per section 80CCD (1B) and above Rs.150000 under section 80C. Withdrawals are restricted as per the terms and conditions.

Tier 2 Account

The account holders can invest an additional amount in Tier-II NPS Account. You are free to withdraw the entire accrued corpus in this Tier at any point in time. If in case you have not contributed towards the Tier II account then it will be automatically deactivated as per process. No tax benefits can be availed in this account.

 National Pension Scheme Benefits

  1. Pension Fund Regulator under the Government of India regulates NPS.
  2. Contributors are free to access and track their investments online.
  3. You are free to choose investment options, annuity options, Annuity Service provider, and Fund Manager.
  4. You are free to take risks in order to ensure high returns and have full control over your investments.
  5. National Pension Scheme is a long investment plan and has a lock-in period of a minimum of 10 years.
  6. You can manage your NPS account easily through online means.

Tax Benefits under NPS Plan

  1. Individual contributor can claim tax benefit of up to Rs.1.5 Lacs under Section 80CCD (1).
  2. Individual contributor can claim tax benefit of up to Rs.50000 under Section 80CCD(1B).
  3. Corporate Contribution made up to 10% of the employee’s salary is exempted under section 80CCD (2).

Pension Fund Managers

There are 8 Fund Managers chosen by the Pension Fund Regulator under the Government of India and you can see all of them below

  1. HDFC Pension Management Company Limited
  2. UTI Retirement Solutions Limited
  3. Kotak Mahindra Pension Fund Limited
  4. LIC Pension Fund Ltd
  5. SBI Pension Funds Private Limited
  6. ICICI Prudential Pension Funds Management Company Limited
  7. Birla Sunlife Pension Management Limited

Here are the insurance companies that are registered under the Pension Fund Regulator under the Government of India. After the completion of 60 years, you can start annuity with the following insurance companies.

  1. HDFC Standard Life Insurance
  2. Star Union Dai-Chi Life Insurance
  3. Life Insurance Corporation of India
  4. ICICI Prudential Life Insurance
  5. SBI Life Insurance

Fees and Charges of NPS

Initial Subscriber Registration Rs.200
Initial Contribution0.25% of the Initial Contribution with a minimum of Rs.20 and a maximum of Rs.25000
All Non-Financial TransactionsRs.20
PersistencyRs.50 per annum
PRA Opening Charges Rs.39.36
Annual PRA Maintenance cost per accountRs.57.63
Charge per transactionRs.3.36

Eligibility Criteria of National pension Scheme

ParticularsTier 1Tier 2
Minimum Contribution Needed at the time of opening an accountRs.500Rs.1000
Minimum Subsequent Contribution NeededRs.500Rs.250
Minimum Contribution Needed every yearRs.1000NIL
Minimum number of Contributions needed in a Year1NIL

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