National Pension System (NPS) is a defined contribution pension system introduced by the Government of India as a part of Pension Sector reforms, with an objective to provide social security to all citizens of India. It is administered and regulated by PFRDA.
Features of NPS scheme
Eligibility - Non-Resident Indians (NRIs) (PIO/OCI customers are NOT eligible for opening NPS a/c)
Age - Individuals aged between 18-65 years
Covered under any pension scheme - Eligible to subscribe
A/c Structure - Tier I – Pension A/c (Mandatory A/c - Tax benefit available) Tier II – Not available to NRIs
Minimum Contribution during A/C opening - Rs. 500 (Tier – I)
Minimum total contribution in a year - Rs.1,000 (Tier – I) (Min. amount per contribution Rs.500)
Part Withdrawals (Tier I) -
(i) A partial withdrawal of accumulated pension wealth for certain purposes, not exceeding 25% of the employee contributions, after a lock in period of 3 years.
(ii) Allowed to withdraw only a maximum of three (3) times during the entire tenure subject to conditions prescribed by the Regulator.
1. On attaining age of 60 years: -
(a) Min. 40% of the corpus needs to be invested in Annuity Scheme.
(b) 60% of the corpus can be commuted/withdrawn in lump sum/ staggered anytime upto age of 70 yrs; 60% of total corpus withdrawn is tax free.
2. Before 60 years of age (after completion of 10 years): -
(a) 20% of the corpus can be withdrawn in lump sum.
(b) 80% of the corpus will be invested in a ‘Annuity Scheme’.
Documents Required (Submission of Aadhaar is not mandatory for NRIs) -
1) Completely filled subscriber registration forms
2) Copy of passport (1st, last and VISA page)
3) Proof of address, if the local address is different from the address mentioned in the passport
4) Recent colour photograph (passport size 3.5 c.m. X 2.5 c.m.)
Sources of Contribution in NPS NRE / NRO Account
1.) Nomination -
Subscriber can appoint a nominee at the time of opening of an NPS account in the prescribed section of the account opening form.
2.) Other features NRI subscriber can opt for Repatriation or Non-repatriation. If subscriber opts for repatriation, Bank account should only be NRE and future contributions must also come from NRE account. If NRI subscriber opts for non-repatriation, the future credits will be made in NRO account only.
3.) NRI Subscriber has option to shift from repatriable account to non-repatriable account
4.) Pension / Annuity will be paid in local currency i.e. INR
5.) If overseas address is opted for communication purpose, it will attract extra charges.
Benefits of investing in NPS for securing Post Retirement Life
1. Tax Benefit (Tier I A/c) : (Provision under both sections are mutually exclusive)
(i) Tax exemption for investments (20% of Gross Income) with a ceiling of Rs. 1.50 lacs u/s 80C.
(ii) Exclusive tax savings provision: Contribution upto Rs.50,000 exempted u/s 80CCD(1B)..
2. Low Cost – A very low-cost product with Fund Management Charges of 0.01%.
3. Superior returns – compared to other pension products – Market linked returns.
4. Flexibility of Investments – Subscribers may select a Pension Fund Manager (PFM) of their choice. Subscribers are allowed to change PFM once during a Financial Year. Subscribers may also define their asset allocation, which may be changed twice in a given Financial Year.
5. One-time shift to NPS - Existing corpus under Superannuation / PF can one-time be transferred to NPS without any Tax Incidence.
6. Online Access to NPS account – 24 X 7 X 365 (Web & Tele) to CRA.
7. Continuation in NPS post retirement – Provision to contribute till 70years or to differ withdrawal upto the age of 70 years.
8. Complete withdrawal for corpus less than Rs.2 lacs - In case total accumulated corpus is less than Rs. 2 Lacs on attaining the age of 60 or later, subscriber may withdraw entire corpus.
9. Standing Instruction (SI) functionality available to average cost of purchase like SIP in Mutual Fund.
10. In an unfortunate death of subscriber, the nominee will receive 100% of the NPS pension wealth in lump sum.
Registration Process -
Please fill up the forms and submit duly filled in forms with self-attested documents to your branch. If you need further information, please contact your Branch or write to us at ‘firstname.lastname@example.org’.