The NPS operates through a defined contribution system, where a portion of the subscriber's income is deducted each month and invested in a pension fund.
Overview on New Pension Scheme in India
The New Pension Scheme (NPS) is a pension plan initiated by the Indian government aimed at offering citizens a means of saving for their retirement and securing a steady income during their senior years. The NPS follows a defined contribution system where a part of the subscriber’s income is deducted monthly and invested in pension funds overseen by expert fund managers. The returns from these investments are then used to provide the subscriber with a pension at retirement. Who Is Eligible For New Pension Scheme In India
Upon retirement, the subscriber can choose to receive a portion of the accumulated savings as a lump sum and the remainder as a regular pension. The NPS is open to all citizens of India, including self-employed individuals and employees of private and public sector organisations. The scheme offers a low-cost and transparent investment option with a variety of investment options, making it an attractive option for retirement planning and Nps Calculator
Eligibility Criteria to Join National Pension Scheme
The National Pension System (NPS) in India is open to all citizens of India between the age of 18 and 65 years, including NRIs and PIOs. It is mandatory for all new central government employees joining on or after 1 January 2004, and voluntary for all other citizens.
- Age: The minimum age to join NPS is 18 years, and the maximum age is 65 years.
- Residency: The scheme is open to all citizens of India, including Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs).
- Occupation: The NPS is mandatory for all new central government employees joining on or after January 1, 2004, and is voluntary for all other citizens.
- KYC: Applicants must have a valid Permanent Account Number (PAN) and provide proof of identity and address.
- Bank Account: The applicant must have a savings bank account, as contributions to NPS are made through auto-debit from this account.
- Minimum Contribution: There is no minimum contribution requirement to join NPS, but contributions must be made regularly to keep the account active.
Important Points to Note Under NPS
National Pension System (NPS) is a pension scheme launched by the Indian Government for citizens of India. Here are some important points to note under NPS:
- Eligibility: Indian citizens between 18-65 years of age are eligible to open an NPS account.
- Contributions: NPS contributors can make regular contributions to their NPS account until they reach 60 years of age.
- Investment options: NPS offers two types of investment options: Active Choice and Auto Choice. Under Active Choice, subscribers can choose to invest their money in various asset classes like Equity, Corporate Bonds, Government Securities, and Alternative Investment Funds.
- Tax benefits: Contributions made to NPS are eligible for tax benefits under section 80C and section 10 (1) (ii) of the Income Tax Act, 1961.
- Partial Withdrawals: NPS subscribers can make partial withdrawals after the completion of 10 years of contributions for specific purposes such as higher education, buying a house, etc.
- Annuity: Upon reaching 60 years of age, NPS subscribers have to mandatorily purchase an annuity with a portion of their NPS corpus to receive a regular pension income.
- Portability: NPS subscribers can switch between different Pension Funds and can also transfer their NPS account from one city to another.
- Minimum contributions: NPS has a minimum contribution requirement of ₹500 per annum.
- Tax on maturity: At the time of maturity, 60% of the corpus must be used to purchase an annuity. The remaining 40% is tax-free.
- Exit: NPS subscribers can exit the scheme before 60 years of age, but a substantial portion of the corpus will have to be used to purchase an annuity
Registering for National Pension Scheme
You can register for National Pension System (NPS) in the following steps:
Choose the Subscriber Type: First, you need to choose between two subscriber types – Corporate and Individual. If you are an individual, you can choose to open an NPS account under the All Citizen Model or the Tier-I account.
Open a Permanent Retirement Account Number (PRAN): Next, you need to apply for a Permanent Retirement Account Number (PRAN) by visiting the nearest Point of Presence- Service Provider (PoP-SP). You can find the list of PoP-SPs on the NSDL (National Securities Depository Limited) website.
Submit the required documents: You need to submit the following documents to open an NPS account:
Proof of Identity (POI) such as PAN card, Aadhar card, Passport, etc.
Proof of Address (POA) such as Voter ID, Driving License, Passport, etc.
Bank details such as cancelled cheques or bank passbook
Recent passport-size photographs
Fill out the NPS Application Form: After submitting the required documents, you need to fill an NPS application form.
Pay the initial contribution: After completing the application process, you need to make the initial contribution to your NPS account.
Start making regular contributions: Once your NPS account is set up, you can start making regular contributions to your account.
Note: You can also register for NPS online through the eNPS portal.
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