National Pension Scheme (NPS)

What is NPS?

• National Pension System (NPS) is a pension cum investment scheme launched by Government of India to provide old age security.
• NPS is regulated by Pension Fund Regulatory and Development Authority (PFRDA).
• NPS scheme allows subscribers to contribute regularly to a pension account during their working life.
• On retirement, subscribers can withdraw a part of the corpus in a lumpsum and use the remaining corpus to buy an annuity to secure a regular income after retirement.

Who can join NPS?

• Any individual citizen of India (both resident and Non-resident) in the age group of 18-65 years can join NPS.

Can a non-resident indian (NRI) join NPS?

• Yes, an NRI can open an NPS account.
• Contributions made by NRI are subject to regulatory requirements as prescribed by RBI and FEMA from time to time. However, OCI (Overseas Citizens of India) and PIO (Person of Indian Origin) card holders and HUFs are not eligible for opening of NPS account.

Can subscriber hold multiples account?

• No, opening multiple NPS accounts for an individual is not allowed under NPS. However an Individual can have one account in NPS and another account in Atal Pension Yojana.

What are Tier-I and Tier-II accounts?

• NPS offers two accounts: Tier-I and Tier-II accounts.
• Tier-I is a mandatory account and Tier-II is voluntary.
• You cannot withdraw the entire money from the Tier-I account till your retirement. Even on retirement, there are restrictions on withdrawal on the Tier-I account.
• The subscriber is free to withdraw the entire money from the Tier-II account.

What are benefits of buying NPS?

• You can invest and avail tax benefit of up to Rs 2 Lakh in NPS; Rs 1.5 lakh under section 80C of the Income Tax Act, 1961 and Rs 50,000 under Section 80CCD (1B) of the Income Tax Act, 1961.
• Interest earned on NPS is exempted from income tax.
• It is voluntary scheme. You can invest any amount in your NPS account.
• It provides better return in future.