DSP

NATIONAL PENSION SYSTEM

Frequently Asked questions

1.Defined Contribution Plan by Government of India (to provide adequate retirement income and old age financial security)
2.Regulated by Pension Fund Regulatory & Development Authority (PFRDA); Oversight by NPS Trust Board
3.Low cost retirement solution (perhaps world’s lowest cost pension scheme!)
4.Portability across jobs, locations; Transparency and Online account access

You can regularly invest your money into your pension account and have the option of taking a part of the corpus as lump sum amount and the balance in form of fixed monthly income as prescribed.

NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Custody of funds and securities is administered through centralised infrastructure controlled by NPS Trust – the Pension Fund Managers do not directly handle fund flows from investors.

1.Voluntary- NPS is open to every Indian citizen. You can choose the amount you want to set aside and save every year. Extending old age security coverage & income to all citizens
2. Flexible- You can choose your own investment option and Pension Fund Manager and see your money grow
3. Portable- You can operate your account from anywhere in the country, even if you change your city, job or your pension fund manager
4.Regulated- NPS is regulated by PFRDA, with transparent investment norms and regular monitoring and performance review of fund managers by NPS Trust
5.Reasonable market based returns over the long term
6.Tax Benefits – Contribution towards NPS exempted under Sec 80 CCD of Income Tax Act, 1961.
7.Low cost investment - Cost effective mode of planning for one's retirement

1.Yes, this is a new tax benefit which started from April 2012.
2.Employer’s Contribution made into your NPS account upto 10% of Basic Salary (Basic + DA) is eligible for additional tax benefit u/s 80 CCD (2) of Income Tax Act, 1961, without any monetary cap (for example if one has high basic salary of say Rs. 50 lakhs, then entire 10% without monetary cap i.e. Rs. 5 lakhs will be eligible deduction).
3.This is an additional tax deduction since it is out of the overall monetary cap of Rs. 1,00,000 for investments such as such as PPF, tax savings schemes, life insurance premium, etc. available u/s 80C, 80CCC and 80CCD(1) of Income Tax Act, 1961.

Yes. Investment in NPS is independent of your contribution to any Provident Fund. You should look at NPS for planning your retirement income and old age financial security.

The initial account opening charges are collected upfront by the POP.

The employer’s contribution to NPS upto 10% of basic plus DA is allowed deduction under section 80CCD (2) and excluded from the limit of Rs.1 lakh.

(In simple terms - Corporate can help their employees to lessen tax burden by saving in NPS upto 10% of their basics salary. This investment is another avenue over & above those of Sec 80C investments to secure their retirement well in advance.)

Individual Employee contributing additionally to the NPS, the investment is eligible for deduction from Income under Section 80CCD of the Income Tax Act 1961. However, investments under Section 80C plus the premium on pension products on Section 80CCC should not exceed Rs.1 lakh per assessment year to claim for the deduction.

1.The suggested contribution amount would be 10% of your Basic Salary. This amount can be directly contributed as a part of your salary processing.
2.However, the stipulated minimum contribution amounts are:
i) Minimum per contribution Rs. 500
ii) Minimum per annum Rs. 6,000
3.There is no upper limit on the amount of Investment in NPS. The tax benefits are restricted to 10% of your Basic Salary without any monetary cap
4.Any additional amount can also be invested in a unique facility under NPS Tier II account. This account can be used as a "savings account" for making additional contributions which could be with a short term horizon. NPS Tier II has no lock-in. There are no tax benefits available under the NPS Tier II account.

1.Yes, you can freely modify the monthly contribution amount of Employee Contribution. The Employer Contribution can be changed within the parameters specified by Human Resources from time to time.
2.The minimum contribution to your NPS Account in a year has to be Rs. 6,000 (total of Employer and Employee Contribution) and there is no upper limit.

There are three products or funds available under NPS:

1. Asset class E: Track either the BSE Sensex or the CNX Nifty index
2. Asset class G: Central & State Government bonds
3. Asset class C: Fixed Income securities bearing Credit Risk

Investments in each of these asset classes are made strictly in accordance with the investment guidelines and restrictions prescribed by PFRDA. Besides the regulatory framework of PFRDA, there is also a strong oversight mechanism on the investment portfolios by the NPS Trust Board.

Depending upon your views and preference, you can do either of the two:
Active allocation amongst these three asset classes
Auto-Choice allocation changing as per your age
(Under both these options, the allocation to Equity asset class is restricted to 50% so as to avoid excessive risk to your overall portfolio)

You can freely change your scheme preference once during the financial year.

Your investments will earn market-linked returns based on the asset class selected. There will not be a specified fixed rate of return.

All return earned on your investments will accumulate in your account rather than being paid out as dividends (like “Growth” option in a Mutual Fund).

age of 60 years to 70 years:
1.Withdraw upto 60% of accumulated savings as a lump sum amount at age 60 or anytime between age 60 and 70.
2.Compulsorily annuitize minimum 40% of accumulated savings. Different Annuity types available eg: life long, 5 years, 10 years, etc. IRDA regulated Life Insurance Companies who are PFRDA approved Annuity Providers eg: LIC, SBI Life, etc.

If you don’t want to wait till 60 - any time before age of 60 years:
1.Withdraw upto 20% of accumulated savings as a lump sum amount.
2.Annuitize minimum 80% of accumulated savings

If you don’t want to wait till 60 - any time before age of 60 years:
1.Withdraw upto 20% of accumulated savings as a lump sum amount.
2.Annuitize minimum 80% of accumulated savings

In case of unfortunate event of death:
1.Nominee will receive as lump sum entire 100% of accumulated savings

Note: Partial withdrawals permitted while continuing with NPS contributions:
PFRDA Act 2013 provides for partial withdrawals upto 25% of the accumulated contributions while continuing the NPS contributions. Such withdrawals would be in accordance with Guidelines prescribed by PFRDA specifying conditions, purpose, frequency and limits. Exposure draft of these Guidelines has been put up on PFRDA website for public comments and is expected to be finalized shortly.
Note:Accumulated Savings converted for purchase of annuity is tax free. Accumulated Savings withdrawn as lump sum is currently taxable However, draft Direct Tax Code or DTC presented in Parliament already has a provision to change this; hence once DTC will be passed such amounts will be expected to become tax free.

An annuity is a financial instrument which provides for a regular payment of a certain amount of money on monthly/quarterly/annual basis for the chosen period for a given purchase price or pension wealth. In simple terms it is a financial instrument which offers monthly/quarterly/annual pension at a specified rate for the period you chose.

Very basic documents will be needed for proof of identity and address. Any one of the following generally easily accessible documents would be sufficient: Passport, Driving License, Voters Identity Card, Aadhar Card (for complete list of documents accepted you can refer to the instructions section of your form).

1.After the registration forms are submitted to a POP, the same is forwarded to CRA.
2.A unique PRAN or Permanent Retirement Account Number is generated and an email alert as well as a SMS alert will be sent to the subscriber.

1.On successful registration, PRAN will be allotted to the subscriber.
2.A PRAN Kit containing PRAN card, Subscriber details (referred as Subscriber Master List) and an information booklet is sent to the subscriber's registered address. The T-Pin and I-Pin are sent separately to the registered address. The PRAN Card is a document with PRAN, subscriber’s name, father's name, photograph and signature/thumb impression. This card proves the completeness of information in the CRA system.

1.Yes, you can simply log into CRA website using your I-PIN (Internet Password) and obtain your statement of transactions on an ad-hoc basis.
2.Besides that, as of March 31st of every year, an Annual Account Statement will be sent to your registered address.

1.A print out of the Statement of Transaction (SOT) could be used as a document for claiming Tax benefit.
2.Since Human Resources team will already have requisite details, they might not need this and typically offer to automatically factor the tax benefits as a deduction in your tax computation while forecasting your tax and preparing Form 16.

The NPS account of an employee is portable across workplaces/geographies or even he/she opts for a sabbatical. In case the employees joins another company which has not yet adopted NPS Corporate Model, employee can continue the NPS account in individual capacity, although the additional tax benefits over and above Rs. 100,000 would be available only for employer contribution.

No. At present, you cannot avail a loan against your NPS holdings.

Yes. Only an Individual can be a nominee. You can nominate a maximum of three nominees. A minor can also be a nominee. In such case, subscriber will be required to provide guardian’s details and date of birth of minor.

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