The National Pension System (NPS) is a voluntary pension scheme which is offered by the Government of India. Under this scheme, subscribers can make voluntary contribution to build a retirement corpus. The NPS interest rate usually ranges from 9% to 12% p.a. NPS contributions toward Tier I account are subject to income tax benefits.
Things to know about National Pension Scheme
There are certain things you must know about NPS before investing in it:
- National Pension Scheme (NPS) is offered by the government of India.
- NPS subscribers, usually in the age bracket of 18 to 65 years, can make voluntary contributions to the scheme in order to build a retirement corpus.
- The scheme is segregated into Tier I and Tier II accounts.
- Tier I is the primary account which the subscriber has to open to be able to open Tier II account.
- Any individual who is Subscriber of NPS can claim tax benefit under Section 80CCD (1) with in the overall ceiling of Rs. 1.5 lakh under Section 80CCE.
- The scheme aims to promote systematic saving amongst the senior citizens of the country.
- NPS is regulated by the Pension Fund Regulatory & Development Authority (PFRDA).
- The scheme does not offer fixed interest rates.
- NPS subscribers can choose to switch their investment options and fund managers during the tenure of the scheme, subject to regulatory restrictions.
- The returns on NPS are based fully on the market rates.
Also, note that NPS subscribers contribute to the scheme regularly or periodically and upon reaching retirement will receive a portion of the retirement corpus in a lump sum while the remaining has to be used to purchase an annuity that provides monthly income to the subscribers for financially managing their retired lives.
Features and Benefits of NPS
Some of the features and benefits of investing in NPS are:
- Simple application process: The application process is very simple. All you have to do is open an account following which you will get a Permanent Retirement Account Number (PRAN) which they you can use for viewing your account and making contributions.
- Attractive Interest Rates: The interest rate ranges between 8% to 12% p.a. and can yield better returns than PPF and other small savings schemes.
- Tax Benefits: You can get tax benefits of up to Rs.2 lakh and more on your investment. However, Tier II accounts are exempted from any tax benefit.
- Transparent: You will know in which kind of funds your money is being invested in and the return you will gain.
- Portable in nature: Your PRAN is a unique number and hence it will not change even if you resign from your current job and get a new one or if you are transferred to another place.
- Completely safe to invest in NPS: It is completely safe to invest in NPS as all the contributions and investments are monitored by Pension Fund Regulatory and Development Authority (PFRDA).
- Dual benefit of compounding effect and low cost: As you invest in NPS, you accumulate wealth until your retirement. Not only that, the charges for maintaining your account is also very low.
FAQ's On NPS Interest Rate
- When can I make a withdrawal from my NPS account?
You can make a withdrawal from your NPS account:
- If your total corpus is Rs.2 lakh and less at the time of superannuation or when you attain the age of 60 years.
- If you looking for a pre-mature exit then the total corpus should be Rs.1 lakh and lower.
No, you cannot hold more than one NPS account.
You will have to make at least one contribution in a financial year if you open a Tier-II NPS account.
You can name up to 3 persons as your nominee under NPS. You will have to provide the name of the nominee, their relationship with you, and the percentage of contribution. The sum of all percentage for the nominees should add up to 100% otherwise the entire nomination process will get rejected.
Yes, a minor can be a nominee. However, the minor’s date of birth and the details of the guardian will have to be provided.
NPS Other Pages
- HDFC National Pension Scheme
- ICICI Bank National Pension System
- NPS Withdrawal Forms
- POP and CRA Charges under NPS
- Axis Bank National Pension System
- Bank of Baroda National Pension System
- Bank of Maharashtra New Pension Scheme
- Central bank of India New Pension Scheme
- South Indian Bank New Pension Scheme
- Canara Bank New Pension System
- Corporation Bank New Pension Scheme
- Federal Bank New Pension Scheme
- IDBI New Pension Scheme