The National Pension Scheme or the NPS is a scheme launched and regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It is a voluntary pension system that provides numerous tax benefits under the EEE status in India. The NPS provides tax-free corpus at the maturity of the scheme, acts as fixed deposits and is considered a reliable option for Investments and helps in fulfilling numerous financial goals. In this article, we will be sharing all the necessary details related to the National Pension Scheme, eligibility criteria, application process, etc.
What is the National Pension Scheme?
The National Pension Scheme is a pension fund regulated by the Pension Fund Regulatory and Development Authority (PFRDA) and is considered to be a voluntary contribution that provides an opportunity to use a market-linked approach that helps in saving money for retirement. This scheme is handled by professional fund managers which reduces the chances of fraud and theft. The National Pension Scheme helps an individual to save funds by opting for numerous portfolios of assets like shares, debentures, governmental bonds, bills, etc. The beneficiaries are provided with a great amount of returns which acts as a great contribution to the gradual growth of the NPS account. All subscribers have to do is contribute to the NPS scheme and then they can enjoy the perks provided in this scheme while providing the option to exit before retirement or opt for the superannuation. The main feature of the National Pension Scheme is that it provides an option to direct the portion of the stockpile amount which can be used to buy an annuity that can act as a lifetime income for the beneficiary.
During retirement or superannuation, the candidate has to use 40% of their accumulated amount for purchasing an annuity, and the rest of the amount can be withdrawn at any time as per their preference. This is a way to ensure that after retirement subscribers are left with a steady income for the well-being of their lives. Some of the details related to the National Pension Scheme are given below:
| Particulars | Details |
| Scheme | NPS Vatsalya Pension Scheme |
| Maximum entry age | 65 years |
| Minimum entry age | 18 years |
| Pension beginning age | After 60 years |
| Annuity purchase | 40% of the entity is stored for the |
| Withdrawal of annuity | Up to 60% of the entity |
| Tax deduction | Under section 80C and 80CCD |
Types of National Pension Scheme
The nps scheme consists of two types Tier I and Tier II in which Tier I is a default account meanwhile the other account is a voluntary addition. Below we have mentioned the types.
| Particular | NPS Tier – I Account |
| Status | Default |
| Tax exemption | Up to 2 Lakh p.a. under the section of 80 C and 80 CCD |
| Withdrawal | Not Permitted |
| Maximum NPS Contribution | No limit |
| Minimum NPS Contribution | INR 1000 |
Objective of the National Pension Scheme
National Pension Scheme is a financial adhesive that is specially designed to help the individual build a considerable retirement entity as a means of financial planning. Moreover, it ensures that the subscribers are leading a secure and financially stable life and are able to handle all the post-retirement expenses without any difficulty. The idea of introducing the nps scheme is to effectively look out the financial problems as senior citizens often face issues after their retirements. Through NPS, one can save a generous entity during their working years which results in a stress-free retirement.
Features of the National Pension Scheme
Some of the features of the nps scheme that an individual should keep in mind while applying for it are:
1) Choice of investment options
The National Pension Scheme provides a wide range of investment options like equity, Governmental securities, corporate bonds, etc. which allows the subscribers to choose the investment option according to their preference.
2) Portability
National Pension Scheme is a portal scheme introduced by the Government which means that even after a change in occupation or job, subscribers can continue to get services under this scheme.
3) Fund management
National Pension Scheme (NPS) provides a fund management system where all the investments of the subscribers are personally handled by the fund manager.
4) Low costs
NPS scheme is a scheme that is famous for its cost-effective features and considered to be a great option for long-term pension saving.
5) Nomination facility
subscribers can nominate a nominee who will be getting all the benefits if the subscriber is unable to make it till the maturity of the scheme.
6) Systematic Investment plan
National Pension Scheme (NPS) initiates investment through monthly contributions which does not give any burden while building financial support over time.
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Benefits of the National Pension Scheme (NPS)
As we have mentioned above, the nps scheme is a widely opted and beneficial scheme for every individual looking for a safe and secure option after retirement. This scheme offers the benefits of tax while ensuring investment flexibility. With the National Pension Scheme (NPS), you can explore numerous features like market-linked returns, tax deductions, ensuring financial growth and security, and having carefree retirement years.
1. Pension benefits
During retirement, the beneficiary is allowed to withdraw 60% of the lump sum amount but the rest of the 40% should be used to buy an annuity through which you can get the regular pension income.
2. Tax benefits
The National Pension Scheme (NPS) allows contributions under Section 80C of the Income Tax Act and the additional deduction under Section 80CCD (1B).
3. Annuity options
Subscribers are provided an opportunity to choose among a wide range of annuity options which helps in ensuring the flexibility for providing pension income.
4. Market – linked returns
The nps scheme offers investment in various places like a mix of bonds, equities, and governmental securities resulting in market-linked returns.
5. Transparency
National Pension Scheme (NPS) ensures that subscribers are familiar with their account status. That is the reason it provides regular financial statements to the subscribers so that they can easily track their investment and pension savings.
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National Pension Scheme (NPS) Eligibility
The person applying for the nps scheme has to follow certain eligibility criteria. However, the eligibility requirement is mentioned below:
- The subscriber’s age limit should fall between 18 to 65 years.
- The subscriber should be an Indian citizen, no matter NRI or residing in another country for the time being.
- Must be familiar with all the KYC norms which are mentioned in the application form.
- NPS is an individual account and it does not support any initiation on behalf of any third person.
How to Open National Pension Scheme Account
By following the below-mentioned steps, one can open a National Pension Scheme (NPS) account without any hassle.
- Visit the official website of NPS.
- Select the option of ‘Register’.
- Select the type of account (Tier I and Tier II) you want to apply for.
- Enter the details like registered phone number, Aadhar number, and PAN Details.
- Choose the fund provider and the investment option.
- Fill in all the necessary personal and bank details.
- Upload the rest of the documents along with your photograph.
- Complete the process by submitting the fee.
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FAQs for National Pension Scheme
1. What is the National Pension Scheme?
The National Pension Scheme (NPS) is a voluntary portal scheme introduced by the Indian Government that helps senior citizens save up money after retirement. It works in such a manner that the beneficiary has to contribute funds to the NPS account and when they retire then they can retrieve these funds for a stable and better future.
2. How do I know my NPS account?
If you own an NPS account then you must keep a check on the status. However, you can check the status by visiting the official online website by using the UMANG app. There are many current holdings of the NPS where you can request the status check. If by chance you are unable to see the balance there must be no credit in the account.
3. Can I withdraw money from NPS?
Yes, the subscriber can easily withdraw 60% of the fund at the end of the scheme as the rest of the 40% will be kept so that subscriber can receive regular interest even after retiring. However, one can make partial withdrawals three times during the whole NPS membership. It is recommended for a person to be an NPS subscriber for at least three years to make a partial withdrawal.
4. Is NPS risk-free?
No, NPS is not a risk-free scheme, it comes with its disadvantages and an individual should take some precautions while investing money in NPS. There are chances of sudden fluctuation in market price as it works according to the market. Moreover, amendments in the Governmental policies and tax benefits can impact the future returns widely. The investment in NPS is contrary as past performance cannot ensure future results.
5. How much will I get from the National Pension Scheme (NPS)?
The amount you get from the National Pension Scheme (NPS) depends upon the amount you invest, the duration of investment, and the amount. However, you can also use the NPS calculator to evaluate the final amount of the pension. Here is the formula for calculating the NPS amount – A = P(1+r/n)^nt
- A: The pension amount
- P: The principal sum amount
- r: The annual interest rate
- t: The total period
- n: The number of times interest compounds
