National Pension System

Below mentioned are some benefits of investing in National Pension System:

1. Returns on Investments: Part of the contributions made towards NPS is invested in equities which offer returns that are much higher than other investment options such as PPF. Under this scheme the rate of interest offered is between 8-10%, which is suitable for investors who want to build a corpus for a financially secure life post their retirement.

2. Tax Benefits: One can avail tax benefits by investing in the National Pension System. The contributions made towards NPS account are eligible for tax exemptions for upto Rs. 1.5 Lakh under Section 80C of the Income Tax Act, 1961. Furthermore, under NPS the contributions made by both the employer and employee are eligible for tax exemptions.

3. Risk Assessment: Currently, equity exposure for the National Pension Scheme has a cap between the range of 75% to 50%. For the government employee the cap is 50%. Within the prescribed range, the equity portion shall be reduced by 2.5% yearly, starting from the year in which the investor completes 50 years of age.

4. Premature Withdrawals: As NPS is a retirement scheme, it becomes mandatory for the investor to keep investing in NPS till the age of 60 years. However, partial withdrawals are allowed under NPS after 3 years from the date of opening an account. Under the premature withdrawal facility of the National Pension System, the subscriber can withdraw upto 25% of the contributions made.

5. Withdrawals After 60: The subscribers cannot withdraw the entire corpus after their retirement, it is compulsory to keep at least 40% of the entire corpus to be able to receive a regular pension from PFRDA registered insurance company. The remaining 60% of the corpus is tax-free.

Types Of National Pension System Accounts

There are two types of accounts under the National Pension System (NPS). Tier I is a default account while Tier II is a voluntary addition. Mentioned below are the details of the two accounts:

Eligibility Criteria Of National Pension System

Below mentioned is the eligibility criteria of investing in National Pension System:

• Any citizen of India can apply for and open the NPS account.
• Anybody between the age of 18 to 65 years can open a NPS account.
• The applicant must be KYC compliant.
• There should not be an existing account of the applicant.