" National Pension System (NPS ) – at a glance ! "

National Pension System (NPS ) –   at  a glance :

• NPS is an easily accessible, low-cost, tax-efficient and flexible retirement account.
• This scheme is the best option for citizens not covered under any pension scheme as the returns are attractive with low risk and low cost.
• The primary objective is enabling systematic savings during working life of the investor.
• The final objective is to provide retirees with an option to achieve financial stability during their golden time.
• Any Indian citizen aged between 18 – 60 years can join NPS.
• NPS for every Indian citizen was introduced by the Pension Fund Regulatory and Development Authority (PFRDA) from May 1, 2009 as an initiative to provide the elder with old age pension security.
• The main intention of this account is to allow elders to enjoy a reasonable market based returns over a long period of time.
• A subscriber is one who joins NPS, under which each subscriber will have one account with Central Record-keeping Agency (CRA) and it will be identified by Permanent Retirement Account Number (PRAN).
• PRAN  is a unique number and it remains with the subscriber all through his life.
• Subscribers are also allocated two accounts, which they can access at any time:

Tier I Account – This is a compulsory  permanent retirement account and withdrawals are not allowed generally. It is solely meant for savings after the subscriber’s retirement.

Tier II Account – This is a voluntary account and  a subscriber is free to make many withdrawals like regular savings account.

• The contributions from the subscriber are invested in a combination of asset classes as per their mode of choice….

1)      Asset Class E (Equity)

2)      Asset Class C (Corporate bonds & Debentures)

3)      Asset Class G (Government Securities)

• Maximum exposure to equity should not exceed 50%.
• PFRDA has appointed 8 fund managers to handle the investment portfolios as given below:

1)      HDFC Pension Management Company Limited

2)      ICICI Pension Fund Management Company Limited

3)      Kotak Mahindra Pension Fund Limited

4)      LIC Pension Fund Limited

5)      Reliance Capital Pension Fund Limited

6)      SBI Pension Funds Private Limited

7)      UTI Retirement Solutions Limited

   8) Birla Sun Life Pension Management

• Subscriber can withdraw 60% of the accumulated wealth during retirement at the age of 60 and 40% is required to buy annuity for getting pension.
• Tax deduction of NPS Tier-I Account :

1)      Deducuction under section 80 CCD (1) with overall ceiling of 1.5 Lakh under Sec 80 CCE

2)      Additional deduction of 50,000/- under section 80CCD (1B)

• Recently, maturity corpus from NPS has been made partially tax free (upto 40% of total      corpus) by Government to make NPS popular.
  
• NPS is generally not promoted by intermediaries due to very low commission they get from this scheme.

Happy Investing !!!

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