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National Pension Scheme (NPS) is a pension scheme sponsored by the Indian Government. Initially this pension scheme was launched for the government employees in 2004. But from 2009, this pension scheme is opened for all sections. Under this scheme, a subscriber can regularly contribute a fixed amount in the form of a pension account during his employment period. After the retirement from the job, the subscriber can withdraw a certain part of the collected money in a lumpsum account. To earn a regular income, after the retirement, the subscriber used the remaining collected amount to purchase an annuity.

The national pension scheme of SBI is one of the highly economical government supported pension scheme in the age group 18-60 for the Indian citizens. Pension Fund Regulatory and Development Authority launch this scheme. The annual minimum contribution for this scheme is Rs. Six thousand only. You can pay this amount either in lumpsum as one single payment or in installment of rupees five hundred every month.

National Pension Scheme is one of the most economical linked market retirement plan as compared to various other retirement plans i.e. Mutual Funds, PPF, and EPF.

For those funds, which are non-government, the fees of fund management are increased 0.25% and for those funds, which are government, the fees are increased 0.0102 %. The POPs can charge rupees hundred plus 0.25% of the investment.

Eligibility Criterion for Joining NPS:

Any citizen of India who has attained the age of 18 and less than sixty can join the National Pension Scheme. The person need to perform KYC for this pension scheme. Even a non-resident Indian can also join this pension scheme.

How to Open an NPS Account Online?

Here we offer step-by-step instructions for opening the NPS Account Online.

  • Keep the following documents ready.
    • Scanned signature image (12 kb size).

    • Photo passport size (4-12 kb size).

    • Credit/Debit Card, Net banking facility.

    • PAN Card or Aadhar Card.

    • Your PAN card should be linked to bank account.

  • Login to the official website of NPS trust
    Select “Individual” by clicking on registration.
  • On your registered mobile number, you will receive an OTP for verification.
  • Select account type.
  • Begin with Tier I account. You can select Tier II, if investing for various goals.
  • For Authentication, Enter The OTP

    Easy OTP authentication is required, if you select Aadhar. Your bank charges the Rs. 125/- and confirm your details, if you use the PAN card.

  • Enter Personal Information

    If you use Aadhar, most of your information will be prefilled in form. To generate the acknowledgement number, click on “Submit”.

  • Select Pension Fund Manager

    Out of seven pension funds, select any one.

  • Select Mode of Investment

    In the auto mode, age and equity allocation modifies. Mix is decided by you in the active mode.

  • Select Investment Mix

    If you choose “active management”, you require to specify spreading the corpus between classes of fund.

  • Appoint Your Nominees

    You require to appoint the nominees, who would receive the corpus, in case there is death of investor.

  • Upload Signature and Photo

    Upload the signature. Upload the picture in case the Aadhar is not used by you.

  • Receiving PRAN By Making Contribution

    For Tier I, the minimum contribution is Rs. Five hundred. For Tier II, the minimum contribution is Rs. 1000. You can make contribution via debit card, credit card and net banking. PRAN is allotted to you after the approval of payment.

  • Download Form

    The final step is to take a printout of form, paste your photo, sign the form and within ninety days, mail this form to CRA office.

How You Can Open NPS Account Offline?

To open the NPS account offline, you require to open NPS account with entities called as Point of Presence. Many of the public and private sector banks are working as POPs. Various financial institutions also work as POPs. Authorized branches of the Point of Presence (POP) works as collection points and called as point of presence service providers.

Permanent Retirement Account Number (PRAN)

A card is issued to each subscriber of NPS. This card contains a unique number of twelve digits. This number is known as PRAN (Permanent Retirement Account Number).

National Pension Scheme offers two kinds of accounts.

  1. Tier-I Account
  2. Tier–II Account

To join the National Pension Scheme, you need to open an NPS account with POP (Point of Presence).

The Tier – I account is an essential account and Tier -II is voluntary. From the Tier I account, you can not withdraw the whole amount till your retirement. In Tier – II account, you can withdraw the whole amount easily.

Tier – I Account

  • It is a basic account of pension with some restrictions on withdrawal.
  • Before reaching the age of sixty years, you can withdraw only twenty percent of your contribution. While the remaining eighty percent have to be compulsory used for purchasing the annuity from a life insurer. The series of payments made at regular durations of time is called annuity.
  • After reaching the age of sixty years (retirement age), you can withdraw the sixty percent of the contribution, and the remaining forty percent contribution can be used to buy the annuity from authorized life insurers.

Tier – II Account

  • It is a voluntary alternative of saving, from which a person can withdraw the money anytime.
  • Remember, you cannot open multiple NPS accounts. In fact, there is no need to open a second account, as NPS is portable across sectors and locations.

PFRDA Fund Managers

It is that organization or individual which takes the decision of investing in portfolios (insurance fund, pension fund or mutual fund) according to the pre-defined objectives of the fund. While opening the account, it is essential to choose a fund manager. PFRDA appoints the seven fund managers, who managed the money.

The accounts of government employees are managed by three government fund managers, i.e. UTI Retirement Solutions, SBI Pension Plan, and LIC Pension Plan. Six fund managers manage the money invested by the others. These six fund managers are UTI Retirement Solutions, SBI Pension Funds, Reliance Capital Pension, Kotak Mahindra Pension, IDFC Pension, and ICICI Prudential Pension.

The important features of Tier – I and Tier – II accounts are following.

Tier – I Account

  • If the fund is government, the employee contributes ten percent of basic salary with dearness allowance, with exactly, the employer also contributes the similar amount.
  • If the fund is non-government, six thousand rupees were paid by the investors, with the option of pay rupees five hundred every installment.
  • If the fund is government, the default investment is made in government and corporate bonds.
  • If the fund is non-government, the default investment is made in liquid funds, Fixed deposits, government funds, corporate bonds, and stocks.

Tier – II Account

  • During the account opening time, the contribution is Rs. One thousand. Or minimum deposit of Rs. 250/- per month can also be selected. It is essential to maintain a minimum balance of rupees two thousand after the end of the financial year.
  • The investment is a mix of liquid funds, FDs, government funds, corporate bonds, and equity.

Minimum Contribution in NPS

A person contributes minimum six thousand rupees each year in a financial year in Tier – I account.

If a person is unable to contribute the minimum account, then his account will be frozen. To unfreeze the account, you need to go to the POP and pay the minimum necessary amount along with a fine of rupees hundred.

The government does not contribute to NPS account.

How does A Person Withdraw the Money from NPS?

To withdraw the money from the NPS, a person requires to submit the application of withdrawal along with requisite documents to the POP. The POP will check the documents and send them to CRA (Central Record-Keeping Agency) and NSDL. Your claim is registered by the CRA. You require to submit some documents to CRA. Along with the withdrawal form, you require to submit the following documents.

  • A Cancelled Cheque
  • Attested copy of Address Proof
  • Attested Copy of identity Proof
  • Original PRAN Card

After submitting the documents, CRA will gives the money to you by processing your application.

Benefits of Tax Available For NPS.

  • For the tax deduction, the personal contribution of an employee is eligible. It is ten percent of the basic salary and dearness allowance.
  • According to the section 80 CCD of the income tax act, the entire ceiling of rupees one lakhs and fifty thousand is allowed under the sections 80 CCE and 80 C.
  • Under the section 80 CCD (2), contribution to the NPS by the employer is exempted
  • Under the section 80 CCD (1B), individuals can claim extra deduction of rupees fifty thousand. Under the section 80 C, this is permitted for Rs. One lakhs and fifty thousand
  • Under the section 80 CCD (1), A person who is self-employed, can contribute up to ten percent of his gross total income.

Advantages of NPS:

  1. Extra Tax Benefit
  2. The finance bill 2011-12 will allows deduction of tax on contributions up to ten percent of basic salary and dearness allowance paid by an employer for the national pension scheme (NPS) account of an employee under the section 80CCE. This is higher than the limit of rupees one lakhs and is applicable only if the employer made the contribution. This is one of the main reason that corporate groups are liking the concept of NPS.

  3. Paying Increased Fee to Intermediaries
  4. For the non-government funds, the fee of fund management has been increased from 0.0009 % of the assets managed to 0.25%. For the government funds, the fee has been modified to 0.0102 from April this year. POPs are permitted to charge rupees hundred plus 0.25 % of the total amount invested. Prior to this, the fee is rupees twenty.

Disadvantages of NPS:

  1. Tax on The Proceeds of Maturity
  2. As per the current rules, around sixty percent deposit on maturity could be withdraw. While the remaining forty percent can be used to purchasing the annuity. Currently, annuity insurance plans based returns are not tax-free. To exempt the NPS funds from the tax during withdrawal, the direct tax code makes plans. The tax during the withdrawal is an obstacle in making the NPS the top pension scheme.

  3. Necessary Annuity
  4. Another problem is restrictions during the withdrawal from the Tier – I account, the pensions saving primary account. After the maturity, you can withdraw only the sixty percent of the funds, the remaining forty percent can be used to purchase the annuity. Tax is not exempted on such returns.

    Also, the annuity has to be purchased from one of the six PFRDA authorized insurers. Alternatives to select from the number of annuity providers are few as the LIC have the seventy percent share in the market.

  5. Reduced on Equity
  6. The portfolios of NPS are restricted to more than fifty percent equity exposure. Those people who are in their twenty’s or thirty’s, this scheme is a loss of money. Over longer periods, the equity has display to provide twelve to fifteen percent return each year. NPS is much better as compared to the traditional schemes of retirement.

    NPs is good than most of its competitors such as mutual funds and EPS. In performance and costs, NPS scores better.

    But the forty percent essential investments in equity after reaching the retirement age, fifty percent cap on exposure of equity, and taxation on returns of annuity does make NPS not a good option.

    Costs and performance are good features of NPS. But it is the investor who has the final say.

Salaried Individuals Investing in NPS Finds Relief After Viewing the Budget 2017.

After the budget of 2017 released, salaried individuals investing in NPS finds the relief via their companies as without paying any tax, they can withdraw twenty five percent of the handouts. The Indian government done some changes in NPS. According to this a certain part of the amount withdrawal from the NPS is tax free. This step is taken by the Finance Minister, Mr. Arun Jaitley.

It brought lot of relief to the subscribers of NPS. The budget has removes the gap between the self-employed persons and individual tax-paying employees as per terms of income tax under the section 80CCD.

To increase the higher limit of contribution to NPS from ten percent of total gross income of a salaried person to twenty percent, a proposal has been made for the amendment of section 80 CCD. As per the sources, this amendment will initiate equality in treatment of tax between the self-employee (non-salaried) or the employee (salaried individual).

Government taken this measure and this will come into action from Ist of April 2018. This will be applicable from assessment year 2018-19.

How Can I Search for POPs Near Me?

To search for the POPs near you, you can access the website of Pension Fund Regulatory and Development Authority (PFRDA),https://www.npscra.nsdl.co.in/pop-sp.php

How Many Types of investment choices available in NPS?

The NPS offers two types of investment choices.

  1. Lifecycle fund or Auto choice:

    This is the standard alternative which automatically invests the money as per the age of the subscriber.

  2. Active choice:

    This alternative permits the investor in determining the money to invest in various assets. For the Both Tier-I and Tier-II accounts, you can modify your choice of investment one time in a financial year.

    You can also modify your pension fund manager and preference of scheme. You could choose various investment options and fund managers for your NPS Tier – I and Tier – II accounts.

    Till then you are seventy years old, you can defer the lumpsum amount withdrawal in NPS.

What happened to my money if I not continue this scheme?

Your account will be frozen, if investment is discontinued by you. But by paying the penalty along with the minimum contribution, you can reactivate the account.

What happened if the NPS subscriber dies before the age of 60?

If the NPS subscriber dies before the age of sixty, the entire amount would be paid to the nominees appointed by the NPS subscriber.

Transfer of Funds from EPF to NPS

It is very simple to transfer or move funds from the Employees Provident Fund to the National Pension System.

  1. Active Account of NPS
  2. The condition is that you must have an active Tier – I account with the NPS. You can open this account through your employer, if the NPS is already implemented. You can also contact a POP (Point of Presence) or you can access the e-NPS website.

  3. Made Request for Transfer of PF
  4. You can make a request for the transfer to the employee superannuation fund or the recognized employee provident fund via the current employer of the person to transfer the balance from the superannuation fund or EPF account to the NPS account of the employee.

  5. Initiation of Transfer
  6. After the receiving of application, the recognized superannuation or provident fund will start the transfer of balances in the superannuation or PF account. A draft or Cheque is issued in the name of the NPS nodal office (for govt. employees case) or in case of all the citizens model, the Cheque or draft is issued in the name of POP collection account.

  7. Letter issued to Employer
  8. From the recognized superannuation or recognized provident fund, a letter is issued to the employer that the amount is transferred to the employee NPS Tier I account. The POP or the nodal office will receive the collected amount and updated it in the Tier I NPS account of the employee.

  9. Also, the funds transferred from Provident Fund to National Pension Scheme not taxable.

How to use and download NPS mobile app?

The NPS mobile app offers many features and permits simple access to the retirement funds of the subscribers. You can download the app NPS by NSDL e-GOV from the Google Play Store or the APP store. After downloading the app, the subscriber need to enter PRAN (Permanent Retirement Account Number) and its PIN.

  • Details of Account

  • After the successful login, the entire holding value of the NPS is shown. The details of the last five transactions are also displayed. The subscriber can see profile information like email id, and registered mobile number etc. these details can be modified by using the app.

  • Requests of Statement

  • For a particular duration, the subscriber can request for the transaction or account statements on his registered email ID.

  • Withdrawal of Tier -II

  • This is a new feature in the NPS app. By using this app, subscriber can login and made request for the withdrawal of Tier – II. By choosing the withdrawal choice, an OTP is send to the registered mobile number of the subscriber. After entering the OTP, subscriber needs to choose the withdrawal specifics, units or amount. After the submission of the selected information, the request is executed by the CRA and the requisite amount will transfer to the registered bank account of the subscriber.

  • Important Points:

  • By using the NPS mobile app, Aadhar number of the subscriber can be linked. The subscriber can also get the option for resetting the password by inputting date of birth and PRAN to generate a one-time password (OTP) for the authentication.

How to register grievances for NPS?

National Pension System (NPS) subscribers can register grievances and complaints with the authorities of the NPS in various ways. The NPS has a responsive, quick, and easily accessible grievance system.

  • Complaint Registration Modes

  • You can generate the complaint via the call center of the NPS CRA, directly to the Central Grievance Management System (CGMS), or online. Complaint can also be submitted physically i.e. in written form.

  • Registration Online

  • An online complaint is easily registered by the subscriber into the CGMS. Details of PRAN also needs to be filled. Otherwise, you can also mention the POP information. Details of grievance can be filled into the form by uploading the supporting documents.

  • Token Issued

  • After the submission of complaint, a token number is shown on the screen. For tracking the complaint as well as for the future reference purpose, make a note of the token number.

  • Complaint by Phone

  • You can also lodge the complaint by dialing the toll-free number of the call center of the CRA. To authenticate his identity, subscriber needs to mention the T-Pin. T-pin is allotted during the NPS account opening. After the complaint is registered, a token number is provided for the future reference purpose.

  • Submission of Complaint Physically.

  • You can submit the written complaint to POP-SP. Complaint is forwarded to the CRA CGMS by the POP-SP. After the registration is successful, a token number is generated and is sent to the POP-SP. From the POP-SP, subscriber can get the token number.

  • Important Points:

  • The status of grievance redressal can be easily seen online on CGMS by inputting the token number generated during the complaint registration time.

    If the complainant is unsatisfied with the redressal, the complaint can be escalated to the NPS trust via a letter or email addressed to the redressal officer of the grievance.

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