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National Pension Scheme: Eligibility, Benefits, Features, Details etc.

Published On Oct 16, 2021

National Pension Scheme (NPS) is a government run pension scheme that was initially launched in January 2004 for government employees. Later this scheme was opened for employees of all sections in 2009. This scheme was launched with a motive to provide financial and social security to all citizens of India. Under this scheme, the subscriber contributes to the pension account on a regular basis during the time the subscriber is working, giving them the benefit of saving a part of their earnings to utilise the amount when they retire.  Under this scheme the subscriber can withdraw a part of corpus in lump sum and use the remaining to purchase an annuity to ensure regular income during retirement. 

Features of National Pension Scheme (NPS)

Below mentioned are some salient features of the National Pension Scheme (NPS):

  1. A portion of investments in the National Pension Scheme goes into equities.
  2. Returns under a Nation Pension Scheme are much higher than other tax savings investment tools.
  3. In case the subscriber is not satisfied with performance of the fund then they can change the fund manager.
  4. Tax deductions of upto Rs. 1.5 Lakh can be availed under National Pension Scheme as the Section 80C of the Income Tax Act, 1961.
  5. Under the National Pension Scheme account the subscriber can only withdraw 60% of the corpus and the remaining amount shall be used to ensure regular income after retirement.
  6. The subscriber can withdraw upto 3 times within 5 years of interval during the entire term.

Eligibility of National Pension Scheme (NPS)

Following is the eligibility to enroll under a National Pension Scheme (NPS):

  • Any resident of India can open a National Pension Scheme.
  • The applicant should not already have a National Pension Scheme account
  • The applicant should have KYC documents or should be KYC compliant
  • Anybody between the age of 18 - 65 years can open a National Pension Scheme account.

Benefit of Investing in National Pension Scheme (NPS)

Below mentioned are the benefits investing in a National Pension Scheme:

  • Good Returns: A part of your contribution made towards an NPS account is invested into equities which provides higher returns as compared to other investment tools. Under this scheme an interest rate of 9% - 12% is offered (it may change). This scheme is ideal for a person who wants to accumulate a corpus over a period of time and to ensure financial security of their family. 
  • Premature Withdrawals: As this a pension scheme is mandatory for the subscriber to invest in this account until 60 years of age. However, under this scheme partial withdrawals are allowed after 3 years from the date of opening the account. The partial withdrawals can only be made at the time of dire requirements such as a medical emergency, funding a child’s education or purchasing a property etc. 

To Conclude 

The National Pension Scheme is a great way to ensure a regular source of income when you want to retire. A person who wants to retire early and does not have a high risk appetite should consider investing in the National Pension Scheme. 

Also read: 

Top Retirement Planning Concepts Everyone Must Be Aware Of

How to Select the Right Retirement Plan?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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