What is National Pension Scheme (NPS)?
National Pension Scheme (NPS) is a government-sponsored pension scheme. It was launched in January 2004 for government employees. However, in 2009, it was opened to all sections. The scheme allows subscribers to contribute regularly in a pension account during their working life. On retirement, subscribers can withdraw a part of the corpus in a lumpsum and use the remaining corpus to buy an annuity to secure a regular income after retirement.
We at Finveda Wealth Management Pvt. Ltd. offer Free Demat Account for opening NPS and we are the one of the best financial advisors in Hyderabad and one of the top mutual fund advisors in Hyderabad.
How NPS Works?
✍Under the NPS, an individual's savings is pooled in a pension fund.
✍These funds are invested by Pension Fund Regulatory and Development Authority (PFRDA) regulated professional fund managers as per the approved investment guidelines in the diversified portfolios comprising of government bonds, bills, corporate debentures and shares.
✍These contributions would grow and accumulate over the years, depending on the returns earned on the investment made.
What are the investment choices available in NPS?
The NPS offers two choices:
✍ Active Choice: This option allows the investor to decide how the money should be invested in different assets.
✍ Auto choice or lifecycle fund: This is the default option which invests money automatically in line with the age of the subscriber.
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%.
What are the investment options available under Active Choice?
The Active Choice offers three funds or investment options:
Asset Class E (invests 50 per cent in stocks);
Asset Class C (invests in fixed income instruments other than government securities);
Asset Class G (invests only in government securities).
An investor can choose one of these funds or opt for a combination of them.
National Pension Scheme Eligibility
All citizens age from 18 years to 65 years of age
Types of Accounts :
Tier I and Tier II.
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 into 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 TAX Benefit
As per the amendment made by Union Budget 2015 in tax provisions for FY 2015-16, if any customer contributes voluntarily towards the NPS scheme, then he would get an additional benefit of ₹ 50,000 under section 80CCD (1B) which would be over and above the ceiling limit of ₹ 1,50,000 as prescribed under section 80 CCE.
The subscribers can choose between 8 Funds for the benefit of NPS namely
✍Kotak Mahindra Pension Fund Ltd.
✍ICICI Prudential Pension Fund Management Co. Ltd.
✍HDFC Pension Management Co. Ltd.
✍LIC Pension Fund Ltd.
✍Reliance Capital Pension Fund Ltd.
✍SBI Pension Funds Pvt. Ltd
✍UTI Retirement Solutions Ltd
✍Birla Sunlife Pension Management Limited
Mutual fund investments are subject to market risk kindly read all documents before investing.
