National Pension Scheme

The National Pension Scheme (NPS) is a voluntary, defined-contribution pension scheme launched by the Government of India. It is overseen and regulated by the PFRDA (Pension Fund Regulatory and Development Authority). While a regular pension scheme involves a predetermined pension amount, NPS or voluntary retirement savings scheme contributions and returns determine the final retirement corpus. Anyone planning for their retirement should consider the NPS. It offers a structured approach to saving for the future and provides tax benefits.

Features of National Pension Scheme

The National Pension Scheme, introduced in 2004, aims to provide a sustainable source of income in the post-retirement years for individuals across various sectors. The table below showcases the NPS scheme's characteristics, investment options, tax benefits, and other important details.

Features Description
Account Types Tier I (Mandatory for Government employees joining after 01-01-2004) & Tier II (Optional)
Contribution Subscriber contributes & Employer contribution (optional for Tier-II)
Investment Choice Multiple investment options with varying risk profiles (Equity, Corporate bonds, Government securities)
Fund Management Professional fund managers manage subscriber contributions.
Systematic Investment Allows for regular contributions to build corpus.

Read More

Read Less

Are you looking for a loan?

NPS Eligibility Criteria

NPS offers a flexible and tax-efficient way to accumulate a corpus for retirement. You have to meet certain eligibility criteria to ensure a smooth enrollment process and adherence to the National Pension Scheme's guidelines.

Here are the few things you need to meet to be eligible to open a National Pension Scheme (NPS) account in India.

  • Age: You must be between 18 and 70 years old at the time you apply.
  • CitizenshipYou can be a resident Indian citizen, a Non-Resident Indian (NRI), or an Overseas Citizen of India (OCI).

Citizenship Eligibility for NPS:

  • Indian Citizens: Any Indian citizen between the ages of 18 and 70 can subscribe to NPS. This includes both salaried individuals and self-employed professionals.
  • NRIs (Non-Resident Indians): Even Indian citizens residing abroad (NRIs) can participate in NPS under the NPS (NRI) scheme.

Note: The following are not eligible to open an NPS account: Persons of Indian Origin (PIOs), Hindu Undivided Families (HUFs), minors below 18 years old, and individuals already having an NPS account.

Potential Beneficiaries of NPS

  • Salaried Individuals: NPS is a good option for salaried individuals who may not have a fixed pension plan through their employer. It allows for regular contributions and potential tax benefits.
  • Self-Employed Professionals: For self-employed individuals, NPS provides a way to build a retirement corpus with disciplined savings and tax advantages.
  • Government Employees (Joining after 01-01-2004): For government employees who joined service after January 1, 2004, Tier-I of NPS is mandatory. However, they can also opt for the voluntary Tier-II account for additional contributions.

Don't know your credit score? You can find out for free!

Check Your Credit Score for Free

Also get a Free Credit Report

Documents Required to Open National Pension Scheme

To open a National Pension Scheme (NPS) account in India, you'll need certain documents to establish your identity, age, and other necessary details. The documents required to open a National Pension Scheme (NPS) account in India can be broadly classified into two categories: mandatory documents and additional documents.

Mandatory Documents for NPS

These documents are essential for verifying your identity and address according to Know Your Customer (KYC) norms. These typically include:

  • PAN Card
  • Photograph
  • Signature
  • Proof of identity documents including Aadhaar card, Passport, Voter ID card, etc.
  • Proof of address documents like Bank statements, utility bills, etc.

Additional Documents for NPS

  • Passport (NRIs/OCIs): If you are a Non-Resident Indian (NRI) or an Overseas Citizen of India (OCI), you will need your passport as well.
  • Foreign Address Proof (NRIs): NRIs will also need to provide proof of their foreign address.
  • Scanned Signature: A scanned copy of your signature may be required during the online application process.

Note: The documents you need may vary slightly depending on the Point of Presence (POP-SP) you choose to register with. The documents should be clear, readable, and valid.

Open a National Pension Scheme Account

NPS is a voluntary retirement savings program in India designed to provide a regular income after retirement. This scheme is a smart way to ensure your financial security post-retirement. You can open a National Pension Scheme account online or through designated branches of Points of Presence (PoPs).

Steps to Open an NPS Account Online

  • Step 1: Visit the official NPS website of the Central Recordkeeping Agency (CRA) you choose.
  • Step 2: Click on 'New Registration' and select the appropriate registration type (Individual or Corporate).
  • Step 3: Fill out the online registration form with your details and use your Aadhaar card for online KYC verification.
  • Step 4: Upon successful registration, you will receive a Permanent Retirement Account Number (PRAN) on your registered email address.

Open an NPS Account Through PoPs

  • Find the nearest POP-SP: A POP-SP can be your bank branch or any other agency authorized to register NPS subscribers.
  • Collect and fill PRAN application form: Obtain the PRAN application form from your chosen POP-SP and fill it out with your details.
  • Submit the form with required documents: Submit the completed application form along with the necessary documents to your POP-SP.
  • Complete KYC and make the initial contribution: The POP-SP will assist with KYC verification and collect your initial contribution (minimum Rs.500).
  • Receive your PRAN: You'll receive your PRAN via mail or SMS after successful verification and processing.

Do you need an instant loan?

Benefits of National Pension Scheme Account

The National Pension Scheme is designed to provide Indian citizens with a steady income stream after retirement. This Government of India program offers a structured approach to saving for your post-retirement years, with the potential for higher NPS returns and tax advantages.

Here's the list of benefits that come with a National Pension Scheme account.

  • Structured approach to saving: NPS encourages regular contributions throughout your working life, building a disciplined savings habit. This helps you accumulate a significant retirement corpus over time.
  • Potential for higher returns: NPS invests your contributions in a mix of equity and debt instruments, depending on your chosen investment option. This offers the potential for higher returns compared to traditional pension schemes that may offer fixed payouts.
  • Tax benefits: Up to 60% of the corpus withdrawn at maturity is tax-free, while the remaining 40% used to purchase an annuity is taxed on the income received. There are also tax benefits on contributions under Section 80CCD(1) and 80CCD(1B) with specific limits.
  • Portability: Your NPS account is portable, meaning you can switch jobs without affecting your retirement savings. Your NPS account goes with you, wherever you work.
  • Choice of investment options: NPS allows you to choose your investment mix based on your risk appetite. You can choose from Equity, Asset Allocator (Aggressive, Moderate, Conservative), and Government Bond(s). This allows you to have some control over the growth of your retirement corpus.
  • Government-regulated: NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), ensuring transparency and security of your contributions.

National Pension Scheme Funds Withdrawal

Withdrawing funds from your National Pension Scheme (NPS) account depends on several factors, including your age and the reason for withdrawal. Here are the situations in which you can consider withdrawing your funds.

NPS Partial Withdrawal

  • Eligibility: You can make partial withdrawals only after being subscribed to NPS for at least 3 years.
  • Frequency and Limits: A maximum of three partial withdrawals are allowed during your entire subscription period. Each withdrawal can be up to 25% of your own contributions (excluding employer contributions).
  • Permitted Reasons: Partial withdrawals are allowed for specific reasons like higher education of children, marriage of children, purchase/construction of a house (with certain conditions), or critical illness treatment.

NPS Maturity Withdrawal (at age 60 or above)

  • Lump Sum Withdrawal: Up to 60% of the corpus can be withdrawn as a lump sum tax-free. The remaining 40% must be used to purchase an annuity that provides you with a regular income stream.
  • Annuity Purchase: You can choose to invest a higher portion (more than 40%) of the corpus to purchase an annuity for a guaranteed income throughout your retirement.

Other NPS Withdrawal Scenarios

  • Premature Death: In case of the subscriber's death, the nominee can receive the entire NPS corpus as a lump sum or opt for an annuity.
  • Exit before 60 (exceptional cases): Under specific circumstances like emigration or certain terminal illnesses, complete withdrawal from NPS may be allowed before 60, but tax implications will apply.

Apply For a Personal Loan at competitive interest rates

Frequently Asked Questions

The National Pension Scheme (NPS) is a voluntary retirement savings program in India for citizens between 18 and 65. It allows you to invest in a market-linked scheme to accumulate funds for retirement and receive a regular income stream after you stop working.

The NPS doesn't offer a fixed interest rate. It's market-linked, so returns vary based on investment performance. Historically, NPS schemes have ranged between 9% and 12% per annum.

The NPS has a lock-in period until you reach 60 years old. However, there are some exceptions: you can make partial withdrawals for specific reasons after 3 years, and upon exiting at 60, you can access a portion of the corpus as a lump sum.

Withdrawing money from NPS before retirement is limited. You can make partial withdrawals for specific reasons if you've been subscribed for 3 years, but the total won't exceed 25% of your contributions. At retirement, a mandatory portion goes towards an annuity, with the rest available for withdrawal.

Yes, NPS contributions are typically made monthly. You decide the amount you contribute, which gets invested and grows over time.

NPS itself isn't entirely tax-free, but contributions offer tax deductions and a portion of the withdrawal at maturity is tax-exempt.

Display of trademarks, trade names, logos, and other subject matters of Intellectual Property displayed on this website belongs to their respective intellectual property owners & is not owned by Bvalue Services Pvt. Ltd. Display of such Intellectual Property and related product information does not imply Bvalue Services Pvt. Ltd company’s partnership with the owner of the Intellectual Property or proprietor of such products.

Please read the Terms & Conditions carefully as deemed & proceed at your own discretion.