National Pension Scheme a Noble Step to Provide Pension

1. National Pension Scheme a Noble Step to Provide Pension What is the National Pension Scheme? National Pension Scheme (NPS) is a contributory pension scheme. It was launched in January 2004 for government employees (except Armed Forces). However, in May 2009, it was opened to all Citizens of India. Benefits of NPS? NPS the voluntary contribution pension system in India has the objectives to provide old age income to all citizens with a reasonable market-based return over the long term. Who can join NPS or National Pension Scheme? Any Indian citizen including NRI, between 18 and 65 years can join NPS. The only condition is that the person must comply with Know Your Customer (KYC) norms. Who is the regulator of NPS or National Pension Scheme? Pension Fund Regulatory and Development Authority (PFRDA) is the regulatory body for NPS. How to join NPS or National Pension Scheme?

2. Open an NPS or National Pension Scheme account with entities known as Point of Presence (POP). Most banks, both private and public sector, are enrolled as POPs. Several financial institutions also act as POPs. The authorized branches of a POP called a point of presence service providers (POP-SPs), act as the collection points. Or can open NPS account online by visiting NPS website through Aadhaar or PAN, Bank details. What is PRAN No.? Every NPS subscriber has issued a card with a 12-digit unique number called Permanent Retirement Account Number or PRAN. Only one PRAN no is allotted to every subscriber. What are Tier-I and Tier –II accounts? NPS offers two accounts: Tier-I and Tier-II accounts. Tier-I is a mandatory account and Tier-II is voluntary account. You cannot withdraw the entire money from Tier-I account till your retirement. Even on retirement, there are restrictions on withdrawal on the Tier-I account. But subscriber is free to withdraw the entire money from the Tier-II account; it is like a saving account. What is the difference between Tier-I and Tier –II accounts? Tier-I account is your pension account & Tier-II is like your saving account. Is it compulsory to have active Tire-I account before you apply for Tier-II account? What are the benefits of Tier- II Account? No additional annual maintenance charge Withdrawal at any point in time Transfer fund from Tier-II to Tier- I account at any time No minimum balance required No exit load charge Separate Nomination facility available Option to select different Investment pattern from Tier I What is the process to open Tier-II Account? Any subscriber who has an active Tier I account can activate a Tier II account It can also be opened along with Tier I account It is open for any citizen of India, both resident, and non-resident.

3. All Government Subscribers who are mandatorily covered under National Pension Scheme (NPS) and have active Tier I account can activate Tier II account What are the Tax benefits? Tax benefit only in Tier-I account Up to Rs. 150,000 under Section 80CCD(1) under 80C. Contribution Up to Rs 50,000 under Section 80CCD(1B). This is over and above tax benefit under Section 80C. There is No tax benefit in Tier-II account. What is the minimum contribution required in NPS? Minimum Rs 6,000 to be contributed every financial year in Tier-I account. But no minimum contribution is compulsory in Tier-II account. What will happen if you do not contribute the minimum amount? If you do not contribute the minimum amount, your account will be frozen. You can unfreeze the account by visiting the POP and pay the minimum required amount and a penalty of Rs 100. Where the money will be invested in NPS or National Pension Scheme? Following are the assets classes are available for investment for investment under NPS Equity or E- A ‘high return-high risk’ fund that invests predominantly in equity market instruments Corporate Debtor C–A ‘medium return-medium risk’ fund that invests predominantly in fixed income bearing instruments Government Securities or G–A ‘low return-low risk’ fund that invests purely in Government Securities Scheme A– Which allows up to 5 %(Newly added asset class for Privet Sector subscriber only) What will happen if the subscriber changes job or location? There is no need to re-open NPS account when you change your Job or location. It can be operated from anywhere in the country irrespective of individual employment and location. You can shift your PRAN from one sector to another, e.g. Central Government to Corporate sector, State Government to Central Government etc. and vice versa. Further, if you are relocated because of any reason, you can also change POP-SP within the same POP or you can change to POP of your choice available to the location.

4. What are the withdrawal conditions? NPS is a pension product. So, it is expected to stay invested until retirement age 60. At 60, you must use at least 40% of the accumulated corpus to buy an annuity from a PFRDA-listed insurance company. You have the option to withdraw remaining 40% of the corpus which is completely tax-free. You can also withdraw the remaining 20% of the corpus but it will be taxed. What will happen in case of 100% premature withdrawal? If you want to withdraw from the scheme before you are 60 years old, you can only withdraw 20 percent of the accumulated corpus in NPS. But remaining 80% of the corpus will be used to buy an annuity. But if the total corpus is less than or equal to Rs. 1 lakh, the subscriber can opt for 100% lump sum withdrawal. What are the conditions for partial withdrawal? Following are the conditions of Conditional Withdrawal: Subscriber should be in NPS for at least for 3 years Withdrawal amount will not exceed 25% of the contributions made by the Subscriber Withdrawal can happen a maximum of three times during the entire tenure of subscription. Withdrawal is allowed only against the specified reasons, for example Higher education of children Marriage of children For the purchase/construction of residential house For treatment of Critical illnesses What documents will be required at the time of withdrawal? You have to submit the following documents along with the withdrawal forms: 1. PRAN card (original) 2. Identity Proof & Address Proof 3. A canceled cheque What is Annuity? An annuity provides a regular income on the monthly, quarterly or annual basis at a specified rate for a specified period chosen by the subscriber. In NPS, a subscriber must use at least 40 percent of the corpus to buy an annuity. It means the person has to buy an annuity plan from an Annuity Service Provider (ASP) to ensure a regular income after retirement.

5. Who is the Annuity Service Provider (ASP)? Life Insurance Corporation of India SBI Life Insurance ICICI Prudential Life Insurance Star Union Dai-ichi Life Insurance HDFC Standard Life Insurance What will happen if the subscriber died before 60 years? Upon Death of Subscriber, the entire accumulated pension corpus (100%) will be paid to the nominee or legal heir of the subscriber. Is Annuity Taxable? The annuity income will be added to your income and taxed as per the income tax slab applicable.