What is NPS?

The government of India established Pension Fund Regulatory and Development Authority (PFRDA) - External website that opens in a new window on 10th October 2003 to develop and regulate the pension sector in the country. The National Pension System (NPS) was launched on 1st January 2004 with the objective of providing retirement income to all the citizens. NPS aims to institute pension reforms and to inculcate the habit of saving for retirement amongst the citizens.

Initially, NPS was introduced for the new government recruits (except armed forces). With effect from 1st May 2009, NPS has been provided for all citizens of the country including the unorganized sector workers on a voluntary basis.

Additionally, to encourage people from the the unorganized sector to voluntarily save for their retirement the Central Government launched a co-contributory pension scheme, 'Swavalamban Scheme - External website that opens in a new window' in the Union Budget of 2010-11. Under Swavalamban Scheme - External website that opens in a new window, the government will contribute a sum of Rs.1,000 to each eligible NPS subscriber who contributes a minimum of Rs.1,000 and maximum Rs.12,000 per annum. This scheme is presently applicable upto F.Y.2016-17.

PRAN will provide access to two personal accounts:

Tier I Account: This is a non-withdrawable account meant for savings for retirement.
Tier II Account: This is simply a voluntary savings facility. The subscriber is free to withdraw savings from this account whenever subscriber wishes. No tax benefit is available on this account.

Eligibility:
Any Indian citizen between 18 and 60 years can join the National Pension System. The only condition is that the person must comply with know your customer (KYC) norms.

Benefits of NPS:

• NPS is backed by the government therefore so it has minimum risk.
• Extra tax benefit of Rs 50000 over and above the Sec 80(C) means we can increase the non-taxable 1.5 Lacs to 2 Lacs using NPS.
• Corpus is managed by highly skilled experts and we have the option to manage the fund allocations online.
• Tax-free withdrawal of funds up to 40% approx of the corpus on retirement i.e. after 60 years.

The following table can help you to understand how NPS can help us in tax saving:

Applicable Sections under the Income Tax Act 1961	ApplicableNPS Tax Benefits
U/S 80CCD (1)	Own contribution of a subscriber towards Tier I investments tax-deductible within the total ceiling of Rs.1.5 lakh u/s 80C.
U/S 80CCD 1(B)	In addition to deductions under section 80CCD (1), subscribers are allowed up to Rs.50,000 as deductions towards Tier I contributions.

The above table is showing how you can save an additional 50000 along with your 1.5 lakh saving through 80C.

Return on NPS account:

By checking the previous history of NPS, we can say that it can easily provide interest from 8-11% yearly.

Who manages the NPS fund:

The money invested in NPS is managed by PFRDA-registered Pension Fund Managers.

Can anyone open more than one NPS account?
No, we cannot open multiple NPS accounts. There is no need to open a second account as NPS is portable across sectors and locations.

What is PRAN?
Every NPS subscriber is issued a card with 12-digit unique number called Permanent Retirement Account Number or PRAN. The subscriber will be allotted a unique Permanent Retirement Account Number (PRAN). This unique account number will remain the same for the rest of the subscriber's life. This unique PRAN can be used from any location in India.

Required Documents:
Anyone can fill the subscriber registration form and submit it along with proof of identity, address, and date of birth.

How to Open NPS Account?
Offline: Anyone can open an NPS account with entities known as Point of Presence (POP). Most banks, both private and public sectors, are enrolled as POPs. Several financial institutions also act as POPs. The authorized branches of a POP called the point of presence service providers (POP-SPs), act as the collection points.

Online: Any citizen of India, who meets the stipulated eligible conditions, can open his/her NPS account through online facility

If you want to open the NPS account or want to calculate the pension then you may visit the NPS website:
http://www.npstrust.org.in/content/pension-calculator

If you have any query related to the NPS then please leave your comment, we will try to resolve your queries.