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New Pension Scheme

With the introduction of section 80CCD (2), NPS has become an attractive way to save taxes and a secure retirement. Contribution made by the employer during the previous year towards NPS on behalf of the employee to the extent it does not exceed 10% of the salary shall be allowed as a deduction in the hands of the employee.

Features

NPS is a PFRDA and Govt of India Initiative to give Citizens of India the perfect retirement solutions. NPS is a voluntary, simple, regulated, portable and flexible pension system that allows you to make small but consistent savings for your retirement.

Types of Accounts:

TIER I : This is a non withdrawable account to which the Subscriber shall contribute his / her savings for building a retirement corpus.

TIER II : This is a voluntary savings facility which provides liquidity to subscribers, i.e. subscribers will be free to withdraw their savings from their account whenever they wish. Tier I account is a perquisite for having a tier II account.

Investment Options:

Active Choice : Subscribers will have an option to actively decide as to how your NPS pension wealth is to be invested in Equities, Fixed income securities and Government Securities.

Auto Choice : NPS offers an easy option for participants who do not have time or required interest to manage their NPS investments. In such case, your funds will be invested in accordance with the Auto Choice options.

Account Type Details Amount
Tier I Minimum amount per contribution Rs 500
Minimum contribution per year Rs 6000
Minimun number of contributions 1
Tier II At the time of activation Rs 1000
Minimum amount per contribution Rs 250
Minimum Yearly Balance Rs 2000


Benefits of NPS:

  • Voluntary: NPS is open to every citizen between 18 to 60 years of age
  • Flexible: You can choose your investment option, amount, pension fund manager
  • Portable: You can operate your account from anywhere in India
  • Regulated: Regulated by PFRDA (GOI undertaking)
  • Continuity: You can continue the NPS account even after leaving your current employment
  • Simple: It is simple to open an NPS account. You only need to provide one photograph and your identity proof and address proof

What are the choices offered at the time of withdrawal?
On attaining at the age of 60 years:

  • 40% of the corpus Mandatorily to be purchase as annuity
  • 60% of the corpus can be withdrawn in lump sum or phased withdrawal
  • 10% of withdrawal every year in case of phased withdrawal and balance needs to be fully withdrawn at the age of 70 years

EET under existing tax provisions. EEE proposed under DTC (Exempt-Exempt-Exempt) method of taxation - exemption at all the three stages of deposit, appreciation and withdrawal. If an individual invest in NPS, the NPS contribution falls under 80C.

Contribution made by the employer during the previous year towards NPS on behalf of the employee u/s. 80CCD(2) to the extent it does not exceed 10% of the salary shall be allowed as a deduction in the hands of the employee.

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