NPS – National Pension Scheme which was started by the Central Government in January 2004.
The main aim of which is to provide a pension to every Indian after their retirement, so that they do not face any financial problems in Old Age.
In simple words, it is a long-term investment plan for retirement like Atal Pension Yojana.
In this, you have to contribute 10% of your Basic Salary + DA to this account and the same contribution is done by your employer.
Interest (8% to 10%) keeps accumulating till retirement, which depends on market risk.
After this, you can withdraw 60% of the total amount together, but at least you have to buy an Annuity Plan of 40% which will continue to pay you a fixed pension for life time.
1. Benefits of National Pension Scheme
If you invest in National Pension Scheme then it can be a profitable deal for you –
1. NPS Return / Interest Rate
A part of the National Pension Scheme is invested in Equity, which cannot give you Guaranteed Return, but it is slightly better than any other Retirement Plan. In the history, till date, it has given an average return of 8% to 10%.
2. NPS Risk
Since a part of it is of equity, there is currently a 50% cap on NSP equity exposure.
Which protects the interest of investors and a proposal to increase it to 75% is being considered by PFRDA in future.
3. NPS Tax Benefit
Talking about Tax Benefit, in this you will get Rs. 80 on the Contribution of yourself and employer under 80C. Deduction up to 1,50,000 is available.
Apart from this, you can also pay Rs. 80CCD (1B) for Additional Self Contribution. Deduction up to 50,000 can be taken.
Overall, you can get Tax Deduction up to a maximum of 2 lakhs.
4. Money Withdrawal Rules
You have to invest for 60 years. After which you can withdraw 60% of the total amount together but you have to buy an Annuity Plan of 40%.
Apart from this, if you continue in NPS for 3 years, you can withdraw up to 25% for some work, like children’s marriage, higher studies, building / buying a house / medical treatment of family etc.
And you can withdraw money 3 times in the entire tenure with a gap of 5 years.
5. Manage NPS Account
Because there is also equity in it, the government allows you to manage your NPS account in Auto Choice or Active Choice.
Along with this, you also have the right to choose your fund manager.
2. Who Can Invest in NPS?
NPS Scheme was earlier introduced only for government employees but after 2009 it was opened to all Indians.
Even NRI’s can also avail this by opening an NPS account.
It mainly consists of 4 sectors –
1 Central Government (For Central Govt Employees)
2 State Government (For State Govt Employees)
3 Corporate Sector (For Private Sector Employees)
4 All Citizens Model (For Personal NPS Account)
Who can open NPS account –
1. Person should be an Indian citizen.
2. Those who are between 18 to 65 years of age.
3. NRI can also open an account but contribution done by him will be subject to RBI and FEMA requirements from time to time.
1. No person can open more than one account in NPS.
2. There is no HUF or jointly opened NPS account.
3. What is the procedure to open NPS account?
You can open your NPS account in two ways which are as follows –
Step By Step Process to Open NPS Account
Before opening an online NPS account, you should have the following documents –
Aadhar Card (With Linked Mobile Number)
Bank Account Details etc.
After this follow this process to open NPS account –
1. First click on this new registration.
2. After that, you have to select the application states and account type, fill your PAN, and select the bank.
3. Then click on Continue.
4. After which OTP will come on your (Adhaar Linked) Mobile Number, enter it and click on Continue.
5. After which some of your information will be auto-updated, in addition to that you have to submit other personal information.
6. With this, upload your e-signature.
7. To activate the account, you have to make a minimum payment of 500 rupees.
8. After which you will get your PRAN i.e. Permanent Retirement Account Number and NPS Account will become active.
If you want to open your NPS account offline, then you have to go to your nearest POP (Point of Presence) or Bank.
Where you will have to fill the NPS form and will have to give the necessary documents like address proof, ID proof, birth certificate, etc. Nowadays almost all banks offer an NPS account facility.
4. Which accounts are available in NPS?
There are two types of accounts in NPS. The first is Tier 1 Account and the second Tier 2 Account –
Your investment [You Contribution]
Talk about your investment, you will have to contribute 10% of your Basic Salary + DA every month, and the same amount of contribution will be done by your employer.
According to the new changes, the government will give a 14% Contribution to Central Government employees.
Annuity Plan in NPS [Annuity Plan]
The amount you invest in an annuity is deposited in the insurance company and according to the Annuity Interest Rate of the insurance company, you continue to receive pension throughout your life.
For example, if you have invested Rs 10 lakh in an annuity and the interest rate is 7%, then the insurance company will give you a pension of Rs 70,000 per year, plus you have the right to choose the monthly pension option.
5. Comparison with other plans
Comparing the NPS to any other Tax Saving or Pension Scheme, some statistics are revealed in this way –
|NPS||8 to 10%||Till Retirement||Depends on Market|
|ELSS||12 to 15%||3 Years||Depends on Market|
|PPF||8.1%||15 Years||No Risk|
|FD||7 to 9%||5 Years||No Risk|
6 NPS Pension Calculator
You can use National Pension Scheme Calculator to calculate NPS pension.
After clicking here, you have to select basic information like – Birth of Date, Monthly Contribution, Expected Return, Annuity Plan & Interest Rate and you will have complete information about your NPS Pension.
For example – BOD – 4 Jan 2000, Monthly Contribution – 1000, Expected Return – 9%, Annuity Plan – 40% & Interest Rate – 6%, then your pension will be something like this –
Read to Know More: Oriental Insurance Policy