NATIONAL PENSION SCHEME

WHAT IS NATIONAL PENSION SCHEME (NPS)?

National Pension Scheme is a government approved

pension scheme for Indian citizens in the 18-60 age group.
While central and state government employees have to
subscribe to NPS (itscompulsory for them), its optional
for others.

WHY DID GOVERNMENT INTRODUCE NATIONAL PENSION SCHEME FOR GOVERNMENT EMPLOYEES ?

Earlier Government of India used to provide a definite pension to

employees after retirement which was based on employee length of
service and average ofemoluments(Basic Pay+ Dearness Pay+
Stagnation Increment + Non-practising Allowance) drawn during ten
months immediately preceding the date of retirement. From 1 Jan 2004
Government made it mandatory for new government employees
(except armed forces) to contribute to National Pension Scheme with
matching contribution by government. This is amove from adefined
benefit pensionto adefined contribution based pension system. Since
1st April, 2008, the pension contributions of Central Government
employees covered by the National Pension System (NPS) are being
invested by professional Pension Fund Managers in line with
investment guidelines of Government applicable to non-Government.

CAN A NON-GOVERNMENT EMPLOYEE ALSO INVEST IN NATIONAL PENSION SCHEME ?

Yes a Non Government employee, between age of 18 to 60

years, can also invest in National Pension scheme. He can
join as as an individual investor or if his company(Corporate
house) joins NPS.

Forcorporate NPS contribution will be in addition to

Employee Provident Fund, or EPF, investments.

WHO REGULATES NATIONAL PENSION SYSTEM?

The National Pension System

(NPS) is regulated by
thePension Funds Regulatory
Development Authority(PFRDA).

WHAT ARE THE ACCOUNTS AVAILABLE IN NPS?

Tier I: contribute into the pension account with restrictions

on withdrawal.

Tier II:a voluntary saving account from which one is free to

withdraw whenever he wishes.
An active Tier I account is a pre requisite for opening of a Tier II.
The government and employers will make no contribution to this
account.

HOW TO WITHDRAW FROM NATIONAL PENSION SCHEME?

Tier-I comes with partial withdrawal options, subject to conditions.

For those looking to exit before turning 60, there is an option to withdraw
20% of the accumulated savings but have to buy an annuity with the
remaining 80%.
When you attain the age of 60, you have to invest at least 40% in an annuity
with IRDA and can withdraw only up to 60 per cent of the corpus.
The nominee can withdraw the full amount only after the death of the
subscriber.

WHAT ARE TAX IN WITHDRAWING OR ON MATURITY IN NATIONAL PENSION

SCHEME?

The NPS is currently under the EET (exempt, exempt, tax) which
means it is tax free on contribution and accumulation but taxable on
maturity.

Hence, an NPS subscriber is taxed on withdrawal and also when he

obtains annuity.

For more about National Pension Scheme

https://www.bankbazaar.com/saving-schemes/nps.html

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