NATIONAL PENSION SYSTEM

National Pension System (NPS) is a defined contribution pension system introduced by the Government of India as a part of Pension Sector reforms, with an objective to provide social security to all citizens of India.

Transaction Slab(in Rs.) Revised Service Charges (in Rs.) using channels IMPS/UPI
Eligibility All Citizens of India
Age Individuals aged between 18-65 years
Already covered under any pension scheme Eligible to subscribe
Two Tier Structure Tier I – Pension account (Tax benefit available under this a/c) Mandatory Account
Tier II – Investment account (Anytime withdrawable corpus without any tax benefit - Optional Account
Minimum Contribution during A/C opening Tier I – Rs.500
Tier II – Rs.1,000
Minimum total contribution in a year Tier I – Rs.1,000 (Min. amount per contribution Rs.500)
Tier II – N.A. (Min. amount per contribution Rs.250)
Part Withdrawals under Tier I (i) A partial withdrawal of accumulated pension wealth, not exceeding 25% of the employee contributions, after a lock in period of 10 years.
(ii) Allowed to withdraw only a maximum of three (3) times with a gap of 5 years during the entire tenure.
Exit Option under Tier I 1. On attaining age of 65 years:
a. 60% of the corpus can be commuted/withdrawn in lump sum anytime up to the age of 70 yrs
b. Minimum of 40% of the corpus needs to be invested in a ‘Annuity Scheme’

2. Before 65 years of age:
a. 20% of the corpus can be withdrawn in lump sum
b. 80% of the corpus will be invested in a ‘Annuity Scheme’

Tax Benefit

I. Exclusive Tax Benefit u/s 80CCD (1B)

Exclusive tax benefit available to NPS subscribers on investments up to Rs.50,000 u/s 80CCD (1B) of Income Tax Act, 1961

II. Tax Benefit u/s 80CCD (1)

  • For Salaried Individual - Investment up to 10% of Salary (Basic + Dearness Allowance) is deductible from taxable income u/s 80CCD (1) of Income Tax Act, 1961 subject to 1.5 lakhs limit of section 80C
  • For Self Employed Professionals - Investment up to 10% of Gross Annual Income is deductible from taxable income u/s 80CCD (1) of Income Tax Act, 1961 subject to 1.5 lakhs limit of section 80C

Some of other key benefits of NPS:

  • Investment choice – NPS offers choice of Investment Options, Pension Fund Managers, Annuity Service Providers and Annuity Plans to Subscribers.
  • Switching facility – NPS offers choice of switching the Service Provider, Investment Option and Pension Fund Manager.
  • Superior returns compared to other pension products – Market linked returns
  • Low Cost – One of the World’s least cost investment options with 0.01% as Fund Management Charge.
  • Portability of NPS Account – NPS account remains the same irrespective of change of geography or employment.
  • Flexible contributions – Amount and frequency of contributions can be altered by subscriber.
  • Continuation in NPS scheme post retirement – Provision to defer withdrawal and to make contributions in the NPS account upto the age of 70 years.
  • Well regulated - NPS is regulated by Pension Fund Regulatory and Development Authority (PFRDA).
  • Online access to NPS account – Online access to NPS account at NSDL.