NPS stands for New Pension System, which is a voluntary contribution scheme for a person till the age 60 years, so that it facilitates necessary pension money after 60 years of age. NPS was introduced by the central government and is monitored and managed by PFRDA (Pension Fund Regulatory and Development Authority).
Who is eligible to subscribe for New Pension Scheme, NPS ?
Any Indian citizen along with NRIs within the age of 18 to 60 years is eligible for New Pension System. The subscribers would have to submit necessary KYC (Know Your Customers) documents along with the registration form.
Who is not eligible for New Pension Scheme, NPS?
The below-mentioned applicants are not eligible for NPS:
- People who already have an NPS account
- Individual without a sound mind are not eligible for NPS. With sound mind, we mean people who are in a metal position to understand the scope, details and implications of the contribution.
- Insolvents that are charged by the court.
What is the core benefit of New Pension Scheme, NPS?
NPS is best suited for those people who do not have access to normal pension and retirement benefits. There are a number of people who are employed with private sector companies and with unorganized sector where pension is not a reality. NPS was launched to cater to this section of population in order to secure a financially stable old age.
Along with this, NPS offers a wide range of benefit, some of which are listed below:
- Voluntary Scheme: NPS is a voluntary scheme and can be subscribed by any Indian National. You can choose any amount of investment that is higher than the minimum required investment
- Flexibility: Investment to NPS is quite flexible in terms of the amount and tenure of investment. You can choose any amount you want to invest and thus secure a good old age for yourself.
- Portability: No matter where your are, you can still operate your NPS account and keep depositing money. Moreover, you can make withdrawals from anywhere across the country.
- Government backed scheme: Investments to NPS are safe and secure as it is a system backed by government of India.
- Reasonable rate of return: the returns of NPS investment are based on market performance and you can rest assured that your money is growing at a pace above than normal.
- Tax Benefits: Along with securing your future, you are also eligible to get tax benefits on your contributions under Section 80C or Income Tax.
Can you invest in NPS if you already have a PPF or any other provident fund scheme account?
Yes, even if you have any other provident fund of retirement scheme with any institution, you are eligible to subscribe to NPS and make contributions as per your wish.
What are Tier I and Tier II of New Pension Scheme, NPS?
These are two various tiers of NPS. They are opened in succession. That means if one has to reach Tier 2 and avail its benefits, he/she has to pass on from Tier 1.
Tier I is a type of account in which you can keep on adding money till you attain an age of 60 years, after which you are eligible to withdraw pension from the account. Before 60 years of age, you are not eligible to withdraw any amount.
Tier II refers to NPS account in which you can deposit money till 60 years and can withdraw certain permissible amount anytime you need.
What are the age limits for New Pension Scheme, NPS?
The minimum age for opening an NPS account is 18 years and the maximum age limit is 60 years. However, the sooner you begin to contribute, the better it is for you since the accumulated amount would be higher in that case.
What is the minimum amount that needs to be invested per year in Tier I in New Pension Scheme, NPS?
For Tier I of NPS account, you need to deposit atleast Rs 6,000 in a given fiscal year. You can break this amount in several deposits during the year, the minimum deposit at a time being Rs 500.
What is the minimum amount that needs to be invested per year in Tier II?
The minimum amount that needs to be deposited in Tier II account per year is Rs 2,000. You can break this amount in several deposits during the year, the minimum deposit at a time being Rs 250.
What is the upper limit for contribution to New Pension Scheme,NPS?
As such, there is no upper limit for contributions to NPS. You can deposit any amount that you wish or can afford during a fiscal year.
What tax benefits would you get on your investments towards New Pension Scheme, NPS account?
Any contribution towards your NPS account is fully exempted from Income Tax under Section 80CCD.
How many times can you contribute to your NPS account during a fiscal year?
At the bare minimum, you need to make atleast one deposit during a fiscal year. There is no upper limit on the number of times you can deposit to your NPS account.
Can you withdraw funds from your NPS account before 60 years of age?
Withdrawals rules for both tiers are different. If you have a tier I account, you can’t withdraw money before you attain an age of 60 years. However, in case of unavoidable need, you can withdraw a maximum of 20% of the accumulated amount. You need to keep atleast 80% of the accumulated amount in your NPS account.
Tier II subscribers, on the other hand can withdraw any amount from their balance at any point of subscription.
Can you withdraw the complete accumulated amount after 60 years of age?
No. After you attain an age of 60 years, you can withdraw only 605 of the accumulated amount. The remaining amount needs to be there in NPS till 70 years. You can also annuitize 100% of your corpus amount.
Can you nominate someone for your NPS account?
Yes, you can nominate anyone for your NPS account. The maximum number of people you can nominate for your NPS subscription is 3 persons.
Who governs and regulates National Pension System?
The scheme is backed by Government of India and is under the regulations from PFRDA.
Can you get an updated account statement of your NPS subscription?
Yes, you can avail updated account statement for your NPS subscription.
How can you deposit money to your NPS account?
You can pay to your NPS subscription through cheque or cash. There is no other option of payment provided for NPS. As a matter of fact, credit to your NPS account is done only after the realization of the cheque offered.
What is PRAN in context of NPS?
PRAN refers to Permanent Retirement Account Number, which is provided to every subscriber at the time of opening of Tier I NPS account. PRAN is the number which has to be mentioned in every transaction and communication you do in regards to your NPS account. PRAN for each subscriber is unique and different.
Who manages the pension funds?
At present, there are five financial institutions associated with managing pension funds for NPS, which are:
- UTI Retirement solutions limited
- Reliance Capital Pension Fund Limited
- Kotak Mahindra Pension Fund Limited
- ICICI Prudential Pension Fund Management Company Limited
- SBI Pension Funds Private Limited
- HDFC Pension Management Company Limited
Is there any assured rate of return on your NPS investment?
No, there is no assured rate of return on your NPS investment. The rate on which your NPS contributions grow is related to the overall performance of the market and consequently, it keeps changing.
What happens in case of death of the subscriber during the course of investment before 60 years?
In case of sudden death of the NPS subscriber, the entire accumulated amount would be given to the nominee of the account. In case there has been no nominee for a subscriber, the entire amount would be paid to the legal heir of the subscriber.
What is Swavalamban Scheme and how is it related to NPS?
According to Swavalamban Scheme, those subscribers who have registered within the period of 2010 to 2013 will have the privilege of contributions by the government in the amount of Rs 1,000 every year. However, the subscriber needs to contribute atleast Rs 1,000 every year in order to avail this benefit.
Swavalamban Scheme is valid for all New Pension System subscribers and the scheme is administered by PFRDA.
How to get registration forms for NPS?
You can download registration form for NPS from the website of POP. You can fill this form in the format specified and submit it back to POP with photograph, self attested KYC documents and your contribution cheque.
What are the charges associated with NPS subscription?
There are certain subscription charges associated with NPS account. Some of the charges that you may be paying during the course of your NPS subscription are as under:
- Initial subscription registration amount of Rs 100 along with ad valorem transaction charge, which is 0.25% of whatever initial contributions are
- On any other transaction apart from contribution to the subscription, the charges are Rs 20
- There are certain processing fees associated with withdrawal requests
How much time would it take for registration after you submit your registration form?
Once you submit your registration form along with KYC documents to POP, it gets forwarded to CRA facilitation centers after necessary validations. Once the verification process is done, PRAN is generated and PRAN Card is printed subsequently.
At your end, you can expect that your PRAN card would be delivered to your registered address within 20-25 days of submitting your form with documents.
Will your get receipt of your NPS application submission?
Yes, your subscription is confirmed to you through email on your registered email ID after you have submitted the registration form along with KYC documents.
How do your come to know about your PRAN generation?
Once you PRAN is generated, you would get an email and an SMS alert at your registered emails ID and phone number respectively.
When can your registration form get rejected?
In most likelihood, if you have sent your form in the correct format along with required KYC documents, your PRAN would be generated within 20-25 days of application. However, if there are any formatting errors or missing KYC documents, your form is liable to be rejected.
Can you exit from NPS subscription before the age of 60 years?
Although it is not recommended to exit before the age of 60 years, however, you can do so if the reason is unavoidable. In that case, you would have to purchase a life annuity for value equal to 80% of the accumulated amount from any of the IRDA listed insurance companies.
The remaining 20 per cent of the accumulated amount can be withdrawn from the NPS account in lump sum.
Can you select your Pension Fund Manager for your NPS savings?
Yes, you can select your own pension fund manager from the six pension fund managers listed above. This choice has to be made at the time of registration for NPS.
Which agencies are involved with National Pension System?
The following agencies are involved with National Pension System:
Controlling Body – PFRDA
Trustee Bank – Bank of India
Central Record Keeping Agency – NSDL
Point of Presence (POP) – there are a number of institutions working as Point of Presence (POP) for NPS. State Bank of India is the core institution involved with NPS.
Which are the registered Annuity Service Providers for NPS?
The following insurance agencies work as Annuity Service Providers for NPS:
- HDFC Standard Life Insurance Company Limited
- Reliance Life Insurance Company Limited
- Star Union Dai-ichi Life Insurance Company Limited
- Bajaj Allianz Life Insurance Company Limited
- ICICI Prudential Life Insurance Company Limited
- State Bank of India Life Insurance Company Limited
- Life Insurance Corporation of India
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