What should you know about the National Pension System before buying it?
National Pension System (NPS) is a retirement benefit scheme from the Government of India to ensure a regular income post-retirement to all its subscribers. The governing body for NPS is Pension Fund Regulatory and Development Authority – PFRDA.
Over the years, the National Pension System (NPS) has become one of the sought-after retirement saving instruments amongst all others. However, Certain new NPS rules have been advised as of late and have permitted the NPS subscribers to pull out the whole corpus on maturity, liable to conditions. As of now, an individual can pull out up to 60% of the accumulated amount while the excess 40% is utilized to buy an annuity plan.
NPS works out to be a decent substitute for EPF (Employee Provident Fund), which accompanies an extra tax break. Thus, it is not a big surprise that NPS has gotten a figure of more than 1,43,90,544 endorsers and has more than Rs. 6.9 Lakh Crore worth of Asset Under Management (AUM) separately. But prior to opening an NPS account, here are a few highlights to keep note of:
Features of National Pension Scheme Account
- Age Criteria: Under the new easy to understand rules, the Pension Fund Regulatory and Development Authority (PFRDA) has additionally expanded the age limit of the Indian Citizens who can apply for NPS. All residents between 18 to 70 years old can opt for this scheme paying little heed to their gender and income-based measures. Senior residents would now be able to select to take on this plan and further make a retirement corpus for their older age while appreciating tax cuts that come along with it.
- Permanent Retirement Account Number (PRAN): To make NPS convenient and simple, each subscriber is provided with a unique identification number called Permanent Retirement Account Number (PRAN). PRAN account can be opened with as low as Rs. 500 contributions. And the minimum base yearly contribution needed to be made is Rs. 1000, and there is no limit for maximum contribution. PRAN account can be operated online, which makes it easily accessible in any part of the world. One can make contributions towards the PRAN account through different modes of payments, including Cheque, Cash, DD, or Fund Transfer across India.
- Pension Fund Manager: The Pension Fund Managers are appointed by the controller prudentially to oversee the funds of the subscribers through various asset classes investments. They are closely observed and critically examined, and their performance is continually held under the radar by the controller.
- Early Withdrawal: In order to make NPS user-friendly, the PFRDA provided the choice of pulling out the assets early because of specific exigencies that might emerge at any time. The people who don’t settle on early withdrawal and hang tight for their retirement, on arriving at the retirement age of 60 years, can make good profits.
- Upgraded Investment Period: Under the National Pension System, one can choose to invest even after the period of investment ends by broadening the tenure of the scheme. The Enhanced Investment Period choice permits the subscriber to accumulate a higher corpus by staying invested for an extra period in the plan.
Benefits of National Pension System (NPS)
- NPS is regulated by PFRDA (Pension fund regulator under Ministry of Finance, Govt. of India.), ensuring transparent norms to govern the related activities. Through regular monitoring, NPS Trust ensures strict adherence to the guidelines.
- One can invest any amount in the NPS account and at any time. It is a voluntary scheme for all citizens of India.
- It gives the flexibility to select or change the POP (Point of Presence), fund manager, and investment pattern. This ensures optimization of the returns as per the comfort of the subscribers with various asset classes, including Equity, Government Securities, Corporate Bonds, and Alternate Assets and fund managers.
- NPS is the most economical investment product available.
- NPS account or PRAN remains the same irrespective of change in employment, city, or state.
- NPS account holders get the flexibility to transfer their Superannuation funds to their NPS account without any tax implication. However, it needs to be post-approval from the relevant authorities. Moreover, on maturity, in case one feels the requirement for an annuity isn’t there or then again if the economic situations are not helpful, one might concede the buying of an annuity. The NPS subscribers might concede their annuity buy for as long as three years from the time they turn 60 years of age or accomplish the age of superannuation.
- The tax benefits that one can get benefit under National Pension Scheme are:
-Up to Rs. 1,50,000 u/s 80CCE (individual tax limit)
-Up to Rs. 50,000 u/s 80CCD (1B) (individual tax limit)
-Up to 10% of Basic Salary u/s 80CCD (2) (Through Employer commitment)
Overall, the National Pension Scheme is a monetarily strong investment choice that is accessible to financial investors and presently opens up an open door for senior residents. Moreover, this gives a likely chance to each one of the individuals who might have botched the chance to build a retirement corpus at an earlier stage.