Tuesday, June 13, 2017

National Pension System for Happy Retirement

Benefits of National Pension System


GUJARAT INFOTECH LTD ( A POP  Approved by PFRDA under National Pension System )

National Pension System (NPS) – All Citizens Model  

What is NPS:

NPS is a low cost, tax-efficient, flexible defined contribution retirement savings System providing for regular monthly income after retirement. Under the NPS, the individual contributes to his retirement account and also his employer can also co-contribute for the social security/welfare of the individual.

NPS is designed on Defined contribution basis wherein the subscriber contributes to his account, there is no defined benefit that would be available at the time of exit from the System.  The accumulated wealth (and subsequent monthly pension) depends on the amount of contributions made, period for which the contribution made and the income generated from investment of such wealth. It is advisable to join the scheme early.

Salient features of the scheme:

A citizen of India, whether resident or NRI, 18 – 60 years of age,   can join the NPS

Types of A/cs: There are two type of a/cs – [1] Tier I and [2] Tier II. The applicant must have Tier I a/c if he wants to open Tier II a/c. Comparison between these two a/cs ca b summarised as under:

Tier I
Tier II
This a/c must be opened to join the NPS.
This a/c is not a mandatory requirement to join the a/c. If the applicant wants to open this a/c, he must have Tier I a/c
This is a non-withdrawable retirement account which can be withdrawn only upon meeting the exit conditions prescribed under NPS.
(Withdrawal from this account is permitted after 10 years of account opening or attaining the age 60 years whichever comes early)
This is a voluntary savings facility available as an add-on to any Tier-1 account holder. Subscribers will be free to withdraw their savings from this account whenever they wish.  Savings can be also transferred in Tier I a/c.
Income Tax benefit is available only for the savings made in this a/c.
No Income Tax benefit is available for the savings made in this a/c.

Rules for contribution:

A/c I
A/c II
Minimum Contribution at the time of account opening
Rs. 500
Rs. 1000
Minimum amount per contribution
Rs. 500
Rs. 250
Minimum total contribution in the year
Rs. 6000
Rs. 2000
Minimum frequency of contributions
1 per year
1 per year

Opening more than one a/c: Not allowed.
Opening/Maintaining Atal Pension Yojana a/c alongwith NPS a/c: allowed

Tax benefit available to the employee:

Individuals who are employed and contributing to NPS would enjoy tax benefits on their own contributions as well as their employer’s contribution as under: -

(a) Employee’s own contribution - Eligible for tax deduction up to 10% of Salary (Basic + DA) under Section 80 CCD (1) within the overall ceiling of Rs. 1.5 lac under Sec 80C. 

Further w.e.f. FY 2015-16, in addition to the deduction u/s 80 CCD (1), deduction of additional amt upto Rs. 50,000 has been allowed for contribution in NPS (U/s 80CCD (1B)).

(b) Employer’s contribution – The employee is eligible for tax deduction up to 10% of Salary (Basic + DA)  (without any limit on maximum amt) contributed by employer under Sec 80CCD(2) over and above the limit of Rs. 1.5 lac provided under Section 80C and also above  Rs. 50,000/- under section 80CCD(1B).

Tax benefit for self-employed: 

As per Budget 2017-18, the self-employed can now contribute in NPS up to 20% of their gross income and the same can be deducted from the taxable income under Section 80CCD (1) of the Income Tax Act, 1961, as against 10% earlier.
Employer’s contribution – Eligible for tax deduction upto 10% of Salary (Basic + DA) contributed by employer under sec 80 CCD (2)

It is to be borne in mind that this contribution is not included in overall limit of Rs. 1.5 lakhs as mentioned u/s 80CCE. Further, as there is no cap on amt, employees with high salary (Basic+DA) will get high income tax benefit under this provision. 

How the fund is invested: The fund is invested in different assets class by the Fund Managers approved by the Pension Fund Regulatory Authority. The Fund Managers publish the Net Asset Value (NAV) of the investment on daily basis. 

How to know the status of contribution made:

Each subscriber is given Permanent Retirement Account Number (PRAN) in which all his contribution will be credited. You can view on line the status of your a/c on the Central Record Keeping Agency, through the PIN (Personal Identification Number) allotted to each subscriber. The CRA also mails the Statement of Transaction every year. 

Annuity Service Providers under NPS:

The returns accrued from the investment made by the Pension Fund Manager will be distributed as pension by the Annuity Service Providers every month.

Exit from the NPS:

The Exit rules applicable for All citizen model sector subscribers are 

1. Upon attaining the age of 60 years: 

At least 40% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of an annuity providing for the monthly pension of the subscriber and the balance is paid as a lump sum payment to the subscriber. However, if the corpus is less than Rs. 2 lakh, complete withdrawal may be opted. 

2. Exit from NPS before the age of 60 years (Allowed to subscribers who have been in NPS for atleast 10 years):

In such an eventuality, at least 80% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of an annuity providing for the monthly pension of the subscriber and the balance is paid as a lump sum payment to the subscriber. However, if the corpus is less than Rs. 1 lakh, complete withdrawal may be opted. 

3. Upon Death of the Subscriber:

In the unfortunate event of death of the subscriber, the entire accumulated pension wealth (100%) would be paid to the nominee / legal heir of the subscriber and there would not be any purchase of annuity/monthly pension.

Where to open the A/c:

The PFRDA has appointed POPs (Point of Presence) who are the interface point for the subscribers want to open NPS account. Gujarat Infotech Ltd is one of approved POPs. Contact details of Gujarat Infotech Ltd:    



Phone: 079-27485109, 27452276 



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