Are you looking to build a stable financial future for your golden years? Then, the National Pension Scheme (NPS) might be worth considering. This government-backed program helps you save for retirement. In this article, we will learn how to invest in NPS via offline and online methods, eligibility criteria, and other details.
The National Pension Scheme (NPS) is a government program that helps people save for retirement. Earlier, investing in NPS was limited to central government employees, but now, it is open to all professionals in India, even those working in the unorganised sector.
Under NPS, you can contribute regularly to your NPS account during your working years. Upon retirement, you can withdraw a portion of the accumulated amount as a lump sum. The remaining amount is used to provide you with a steady monthly income. The Pension Fund Regulatory and Development Authority (PFRDA), administered by the government of India, regulates the NPS.
The eNPS portal offers a convenient investment method if you"re comfortable with online procedures and Internet banking. However, if you prefer in-person assistance or have limited internet access, investing in NPS offline will be a better option.
Collect the subscriber form from a PoP (point of presence): A PoP is a bank or authorised agency registered with PFRDA. Fill out the subscriber form and submit it along with your KYC documents (skip this step if you"re already KYC-compliant with that bank).
Make your initial investment. To get started, you need to make a minimum investment of Rs500. This can be a one-time payment or smaller regular contributions (at least Rs250 monthly or Rs1000 annually).
Once your application is processed, the PoP will send you your Permanent Retirement Account Number (PRAN). This unique number acts as your NPS account ID.
You"ll also receive a welcome kit containing your password. Use these credentials to access and manage your NPS account online.
Opening an NPS account online can be done in under an hour, especially if your PAN, Aadhaar, and mobile number are linked. Follow these steps:
The National Pension Scheme (NPS) offers tax benefits for both employees and employers. Here are the NPS taxation benefits:
Employee contributions: By investing in NPS, you can save up to 10 percent of your salary (basic + DA) on taxes under Section 80CCD(1) within the overall limit of Rs1.5 lakh under Section 80CCE.
Self-employed individuals: Under Section 80CCD (1), self-employed individuals can claim a tax deduction of up to 20 percent of their gross income, subject to the Rs1.5 lakh ceiling under Section 80CCE.
Tax benefit for businesses: Under Section 36 (1) (iv) (a), companies can deduct contributions made to their employees" NPS accounts (up to 14 percent of the basic salary) as a business expense.
NPS emphasises long-term saving for retirement. However, there are provisions for early withdrawal and exit under specific circumstances. Here"s a breakdown of the key points:
In the event of the subscriber"s death, the entire accumulated pension corpus (100 percent) is paid out to the designated nominee or legal heir.
What is the NPS interest rate?
Unlike traditional fixed deposits with guaranteed interest rates, NPS offers market-linked returns. Historically, NPS has provided returns ranging from 9 percent to 12 percent per annum.
Can I have more than one NPS account?
No, opening multiple NPS accounts for the same individual is not allowed. You can only have one active NPS account.
First Published: Jul 26, 2024, 15:18
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