NPS (National Pension System)

NPS (National Pension System) and its benefits

The NPS National Pension Scheme is a government-backed retirement savings initiative introduced by the Pension Fund Regulatory and Development Authority (PFRDA). Designed to provide financial security to Indian citizens during their retirement years, the NPS is a voluntary, long-term investment plan that offers market-linked returns along with tax benefits. 

NPS (National Pension System), National Pension Scheme (NPS), NPS benefits, NPS tax benefits, NPS withdrawal rules, NPS Tier 1 account, NPS Tier 2 account, NPS investment options NPS maturity amount, NPS annuity plan, NPS returns, NPS vs PPF, NPS tax exemptions under 80CCD, NPS lock-in period, NPS premature withdrawal, NPS disadvantages, NPS pension calculator, NPS for self-employed, NPS vs EPF, NPS nominee rules, NPS exit rules,

What is NPS (National Pension System)?

 Launched in 2004, the NPS was initially introduced for government employees but was later extended to all Indian citizens in 2009. It allows individuals to invest regularly in a pension account during their working life and withdraw a portion of the accumulated corpus at retirement while using the remaining amount to buy an annuity (regular pension income).

The NPS is a defined contribution scheme, meaning that returns depend on the performance of the underlying investments in equity, corporate bonds, and government securities.

Eligibility for NPS (National Pension System)

The eligibility criteria for enrolling in the National Pension Scheme are:

  • Citizenship: Only Indian citizens (resident or non-resident) can apply.
  • Age Limit: Any individual aged 18 to 70 years can open an NPS account.
  • KYC Compliance: Applicants must provide Know Your Customer (KYC) documents, including PAN, Aadhaar, and address proof.
  • Employment Type: Available to both salaried and self-employed individuals.

How to Apply for NPS (National Pension System)?

Individuals can apply for NPS both online and offline through the following steps:

1. Online Application for NPS (National Pension System) – (eNPS Portal)

  • Visit the official eNPS portal (https://enps.nsdl.com or https://nps.kfintech.com).
  • Click on “Register” and choose Individual Subscriber.
  • Provide Aadhaar, PAN, or PRAN (Permanent Retirement Account Number) for registration.
  • Fill in the required personal details, nominee details, and select fund managers.
  • Upload scanned copies of Aadhaar, PAN, and signature.
  • Make the initial contribution (minimum ₹500 for Tier I and ₹1,000 for Tier II).
  • Submit the application and receive the PRAN number, which serves as your unique NPS ID.

2. Offline Application (Through POPs – Points of Presence)

  • Visit a registered Point of Presence (POP), such as banks, post offices, and financial institutions.
  • Collect the NPS Subscriber Registration Form and fill in the details.
  • Attach KYC documents like PAN, Aadhaar, and address proof.
  • Make an initial deposit.
  • Submit the form to the POP, and upon verification, you will receive the PRAN card by mail.

NPS (National Pension System) Account Types

NPS offers two types of accounts:

  1. Tier I Account (Primary Pension Account)
    • Mandatory for NPS subscribers.
    • Partial withdrawal allowed only under specific conditions (education, marriage, medical emergency, etc.).
    • Minimum annual contribution: ₹1,000.
    • Contributions made towards NPS Tier 1 are tax-deductible and qualify for deductions under Section 80CCD(1) and Section 80CCD(1B).
  2. Tier II Account (Voluntary Investment Account)
    • Optional savings account with no withdrawal restrictions.
    • Provides better liquidity than Tier I.
    • No tax benefits for private-sector employees.

Benefits of NPS (National Pension System)

1. Higher Retirement Corpus

NPS provides market-linked returns by investing in a mix of equity, corporate debt, and government bonds, helping individuals accumulate a significant retirement corpus.

2. Professional Fund Management

NPS investments are managed by PFRDA-registered pension fund managers, ensuring professional management and better returns over time.

3. Flexible Investment Choices

Subscribers can choose their asset allocation and switch between fund managers if needed. The two investment options are:

  • Active Choice: Investors can decide their asset allocation.
  • Auto Choice: Asset allocation is managed based on the subscriber’s age.

4. Portability

NPS accounts are portable across jobs and locations, making it ideal for professionals who switch jobs frequently.

5. Partial Withdrawal Facility

Subscribers can withdraw up to 25% of their contributions after three years, subject to specific conditions.

6. Low-Cost Structure

Compared to mutual funds, the expense ratio of NPS is one of the lowest, making it a cost-effective long-term investment.

 

Buy Health policy, Buy affordable health plans, buy critical illness plans, Buy Cardiac care health plan, Buy diabetes care health plan, family health coverage, compare health plans, Buy health insurance, Health insurance offline, Save from online fraud, Individual health insurance, Family floater insurance, Corporate health insurance, Maternity benefit plans, Personal accident insurance, Travel insurance plans, Senior citizen health insurance, Critical illness insurance, Diabetes care insurance Cardiac care insurance, OPD benefit plans, Affordable health insurance, Cashless health services, International health coverage Online health scams, Online OTP sharing fraud, Best health insurance plans, Health insurance quotes, Health insurance comparison, Family health coverage, Individual vs family floater, Pre-existing condition coverage, Short-term health insurance, Long-term health insurance, Comprehensive health plans, Basic health insurance, Health insurance benefits, Health insurance renewal, Tax benefits on health insurance, Preventive health check-up coverage, Network hospitals for cashless claims, Health insurance for freelancers,

Tax Benefits of NPS (National Pension System)

NPS offers attractive tax benefits under the Income Tax Act, 1961:

 1. Tax Deduction on Employee Contributions

  • Contributions up to ₹1.5 lakh per year qualify for a tax deduction under Section 80CCD(1) (part of the ₹1.5 lakh limit of Section 80C).

2. Additional Deduction Under Section 80CCD(1B)

  • An extra ₹50,000 deduction is available exclusively for NPS investments under Section 80CCD(1B).
  • This means total tax savings of up to ₹2 lakh per year.

3. Employer Contribution (For Salaried Individuals)

  • If an employer contributes up to 10% of the basic salary + DA towards NPS, the amount is deductible under Section 80CCD(2).
  • This benefit is over and above the ₹2 lakh limit and is exclusive to salaried employees.

4. Tax Exemption on Maturity

  • At retirement (60 years), 60% of the corpus can be withdrawn tax-free under Section 10(12A).
  • The remaining 40% must be used to buy an annuity, which is taxable as per your income slab.

Conclusion

The National Pension Scheme (NPS) is a robust, tax-efficient, and market-linked retirement savings option for both salaried and self-employed individuals. With flexible investment choices, low costs, and professional fund management, it is an excellent option for long-term financial planning.

By enrolling in the NPS early, individuals can maximize their retirement corpus and enjoy significant tax benefits, ensuring financial security in their golden years.

To start National Pension System ( NPS) account to save tax, call 9886568000