National Pension System for Saving Tax
Secure your golden years while saving tax
National Pension System (NPS) is a social security initiative by the Central Government. This pension programme is open to employees from the public, private and even the unorganised sectors with the exception of those from the armed forces.
Why to invest?
- A voluntary, defined contribution retirement savings scheme, regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
- One investment with dual benefits of tax saving and retirement planning
- Low fund management charges
- Delivered 8% to 10% annualised returns in the past
- Flexibility to switch from one investment option to another or from one fund manager to another
- Tax exemption is available up to 10% of salary (basic + DA) for contribution made by employer under section 80CCD (2) for Salaried Employees. For the self-employed taxpayer, this limit is 20% of the gross income.
- Tax exemption is available up to investment of ₹ 50,000 under section 80CCD(1B), over and above exemption on ₹ 1.5 lakh under section 80CCE
- Tax exemption can also be availed under section 80CCD(1), if the limit of ₹ 1.5 lakh has not been utilized.
- The maximum amount eligible for deduction will be lowest of the below:
- a. Actual NPS contribution by employer
- b. 10% of Basic + DA
- c. Gross total income
Know before you invest
- Investment is made in a mix of equity, corporate bonds and government securities
- Returns depend on the fund and market conditions
- Up to 50% withdrawal possible in specific cases like child’s education, marriage, etc. Post 60 years of age, withdrawal of 60% of corpus is possible and it is tax free. It is required to keep aside at least 40% of the corpus compulsorily to receive a regular pension from a PFRDA-registered insurance firm.
- Get 10% additional tax benefit on basic salary under Section 80CCD(2) only for empanelled corporates.
Retirement Calculator -NPS
Click here to assess your investment needs and identify the corpus required for your financial well-being after retirement.
National Pension Scheme Benefits & Features
NPS offers a range of investment options and choice of Pension Fund Managers (PFMs) for planning the growth of your investments in a reasonable manner and see your money grow. Individuals can switch over from one investment option to another or from one fund manager to another, subject to certain regulatory restrictions. The returns are totally market related.
Flexibility to choose between 8 Fund Managers:
The subscribers can choose between 8 Fund Managers namely -
- ICICI Prudential Pension Fund Management Co. Ltd.
- HDFC Pension Management Co. Ltd.
- Kotak Mahindra Pension Fund Ltd.
- LIC Pension Fund Ltd.
- Reliance Capital Pension Fund Ltd.
- SBI Pension Funds Pvt. Ltd
- UTI Retirement Solutions Ltd
- Birla Sunlife Pension Management Limited
One Fund Manager must compulsorily be selected.
Flexibility to choose between Active and Auto Choice for distribution:
A subscriber must choose between active choice and auto choice for distribution of his contribution. If active choice is selected, the subscriber must indicate the percentage distribution between corporate, gilt and equity. The maximum investment allowed in equity is 75%.
Simple: Opening an account with NPS provides a Permanent Retirement Account Number (PRAN), which is a unique number and it remains with the subscriber throughout his lifetime. The scheme is structured in to two tiers:
- Tier-I account: This is the non-withdrawal Permanent Retirement Account in which the accumulations are deposited and invested as per the option of the subscriber.
- Tier-II account: This is a voluntary withdrawal account which is allowed only when there is an active Tier I account in the name of the subscriber. The withdrawals are permitted from this account as per the needs of the subscriber as and when claimed.
NPS provides seamless portability across jobs and across locations, unlike all current pension plans. It would provide an easy arrangement for the individual subscribers
NPS is regulated by PFRDA, with transparent investment norms, regular monitoring and performance review of fund managers by NPS Trust.