Last Updated: March 23, 2023, 08:24 IST
NPS is run and controlled by Pension Fund Regulatory and Development Authority (PFRDA).
All residential and non-residential Indians aged between 18-70 years are eligible to open an account with NPS.
The Government of India launched the National Pension System (NPS) as a part of the pension sector reforms in 2004. Under this outlined contribution pension system, particular person financial savings are pooled right into a pension fund. They are invested in diversified portfolios comprising authorities bonds, company debentures, and equities by skilled fund managers regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Over the years, particular person contributions will develop and accumulate primarily based on the returns on funding made.
All residential and non-residential Indians aged between 18-70 years are eligible to open an account with NPS.
How It Works
According to the Department of Financial Services, NPS is run by means of an unbundled structure. The framework includes intermediaries appointed by the PFRDA Pension Funds, Points of Presence (PoP), Custodians, Central Recordkeeping Agency (CRA), National Pension System Trust, Trustee Bank, and Annuity Service Providers (ASPs).
Subscribers can select one of many many Pension Fund Managers (PFM) that fits them the perfect. They are additionally allowed to vary the PFM as soon as in a Financial Year (FY). A minimal Fund Management Charge of 0.03-0.09 per cent is relevant.
Account Types
An particular person opening an account with NPS is allotted a singular Permanent Retirement Account Number (PRAN). This is transportable throughout jobs and geographies and stays with the subscriber all through their lifetime. With their PRAN, they will go for a Tier-I account, or improve it one degree larger.
Tier-I account is the non-withdrawable everlasting retirement account. The subscriber’s common contributions are credited and invested primarily based on the chosen portfolio or fund supervisor. The minimal Contribution throughout A/C opening is Rs 500.
Tier-II account could be held provided that the subscriber has an lively Tier-I account. Tier-II account permits withdrawals as per the wants of the holder. The minimal Contribution throughout account opening is Rs 1,000.
Tax Benefits
Only Tier-I supplies tax advantages to the subscriber. With any such account, the worker’s personal contribution in the direction of NPS is eligible for tax deduction underneath part 80 CCD (1) as much as Rs 1.50 lakh. Under part 80CCD 1(B), the subscriber can also be allowed a tax deduction for contributions to NPS as much as Rs 50,000.
The Employer’s contribution in the direction of NPS is eligible for tax deduction underneath Section 80CCD (2). This rebate is over and above the restrict prescribed underneath Section 80C.
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