National Pension Scheme (NPS)
NPS was introduced by the Central Government to help the individuals have income in the form of pension to take care of their retirement needs.
Benefits of NPS
Flexible
You get the freedom to decide your investment allocation among the four asset classes available, depending on your risk appetite and the return expectations. You also get the flexibility to shift your pension fund manager and scheme preference.
Simple and Tax efficient
You get the freedom to decide your investment allocation among the four asset classes available, depending on your risk appetite and the return expectations. You also get the flexibility to shift your pension fund manager and scheme preference.
Portable
You get seamless portability across jobs, sectors and locations with NPS. It is a hassle-free process while shifting to the new job/location, without leaving behind the built corpus. After exercising the portability option, you can continue with the same scheme and fund manager or can also change as per your choice.
Regulated and Transparent
NPS is regulated by PFRDA with transparent investment norms, regular monitoring and performance review of pension fund managers by NPS Trust.
Dual benefit of Low Cost and Power of Compounding
You get the benefit of lowest account maintenance costs with NPS as compared to similar pension products across the globe. While saving for a long-term goal such as retirement, the cost matters a lot as the charges can trim off a significant amount from the corpus over 35-40 years of investment period.
Till the time you stay invested, the accumulated corpus grows over a period of time at a compounding rate and offers optimum market linked returns based on your investment choice. With this dual benefit of low cost and compounding, you get the benefit of larger corpus.
Online Access
The facility of online contributions, activating Tier-II, D-Remit is also available online. You can manage/ access your NPS account online through the portals offered by the respective CRA
| NPS scheme is structured into two tiers | |
| Tier-I account : | Tier-II account : |
| This is the permanent retirement account into which the regular contributions made by the subscriber and/or their employer and are credited and invested as per the scheme/fund manager chosen by you. | This is a voluntary / optional withdrawable account which is allowed only you have an an active Tier I account. The withdrawals are permitted from this account as and when you require. |
| Individual Pension Account | Optional Account and requires an active Tier-I Account |
| Withdrawal as per Exit & Withdrawal rules and regulations | Unrestricted withdrawals |
| Minimum contribution to open is Rs.500/- | Min. Contribution to open is Rs.250/- |
| Min. Contribution per year is Rs.1000/- | There’s no restriction on min. Contribution per year |
| AMC charges applicable | No separate AMC charges applicable |
| – | Anytime switching to Tier-I allowed |
| You need to choose the asset classes as well Pension Fund Manager (PFM) along with the percentage allocation to be done in each scheme. | ||
| There are four asset classes from which the allocation is to be specified under a single PFM | ||
| Asset Class E – Equity and related instruments | ||
| Asset Class C – Corporate debt and related instruments | ||
| Asset Class G – Government Bonds and related instruments | ||
| Asset Class A – Alternative Investment Funds including instruments like CMBS, MBS, REITS, AIFs, Invlts etc | ||
| While choosing the asset class, subscribers must note that | ||
| Percentage contribution value cannot exceed 5% for Alternative Investment Funds | ||
| The total allocation across E, C, G and A asset classes must be equal to 100%. | ||
| For Tier-II, you can allocate 100% to Equity. | ||
| For Tier-I, you can allocate 75% to Equity. |
Active Choice
NPS offers an easy option for you to invest in a Life-cycle fund in which the proportion of funds invested across three asset classes that are determined by a pre-defined portfolio and would change as per your age.
| Under Active Choice, you can plan and choose on how your contribution is to be invested. You can choose the PFM, the scheme(s) as well as the percentage allocation in the asset classes. | |
| Asset Class | Maximum allocation of investment in the asset class |
| E | Up to 75% |
| C | Up to 100% |
| G | Up to 100% |
| A | Up to 5% . |
| Note: Investment in Asset Class A is available only for NPS Tier 1 account. | |
Auto Choice
NPS offers an easy option for you to invest in a Life-cycle fund in which the proportion of funds invested across three asset classes that are determined by a pre-defined portfolio and would change as per your age.
| As age increases, your exposure to Equity and Corporate Debt tends to decrease under Auto Choice. Depending upon your risk appetite, there are three different options available within ‘Auto Choice’ – Aggressive, Moderate and Conservative. | |
| LC75 – Aggressive Life Cycle Fund | |
| LC50 – Moderate Life cycle fund | |
| LF25 – Conservative Life cycle fund |
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| Intermediary | Charge head | Service Charges* | ||||||
| Private / Govt. | Lite/APY | |||||||
| CRA | PRAN Opening charges | CRA charges for account opening if the subscriber opts for Physical PRAN card (in Rs.) | CRA charges for account opening if the subscriber opts for ePRAN card (in Rs.) | Rs. 15.00 | ||||
| Welcome kit sent in physical | Welcome kit sent vide email only | |||||||
| PCRA | 40 | 35 | 18 | |||||
| CCRA | 40 | – | 18 | |||||
| KCRA | 39.36 | 39.36 | 4 | |||||
| Note:The reduction in charges will be on the current charge structure and excludes applicable taxes. | ||||||||
| Charges will be applicable post release of the functionalities by CRAs to capture the choice of NPS subscribers to have physical or ePRAN card. | ||||||||
| Annual PRA Maintenance cost per account | PCRA: Rs. 69 | PCRA: Rs. 20 | ||||||
| CCRA: Rs. 65 | CCRA: Rs 16.25 | |||||||
| KCRA: Rs. 57.63 | KCRA: Rs. 14.40 | |||||||
| Charge per transaction | PCRA: Rs. 3.75 | Free | ||||||
| CCRA: Rs 3.50 | ||||||||
| KCRA: Rs. 3.36 | ||||||||
| Instant Bank Account Verification | The existing charge structure for Instant Bank Acct verification which shall be recovered by CRAs from the Subscribers for further reimbursement to the service provider is as follows. | |||||||
| (i) KFin Technologies Ltd (KCRA)- Rs. 1.90+ tax | ||||||||
| (ii) Computer Age Management Services Limited (CCRA)- Rs. 2.00 (Bank Account Verification through UPI) | ||||||||
| (iii) Protean e-Gov Technologies Ltd (PCRA) – Rs. 2.40 + tax | ||||||||
| The above charges include Re NIL credited in the SBA of the beneficiary as part of penny drop process. | ||||||||
| POP | – | All Citizen and Corporate | Govt. | – | ||||
| Initial subscriber registration | Min ₹200/- to Max ₹400/- (negotiable within slab only) | NA | NA | |||||
| Initial and subsequent contribution upload / transactions | upto 0.50% of contribution, subject to Min. ₹30/- Max. ₹25000/- (negotiable within slab only) Non-Financial Rs. 30/- | NA | NA | |||||
| Persistency** | ₹50/- per annum for annual contribution ₹1000/- to ₹2999/- ₹75/- per annum for annual contribution ₹3000/- to ₹6000/- ₹100/- per annum for annual contribution above ₹6000/- (Only for NPS All Citizen) | NA | NA | |||||
| e-NPS (for subsequent contribution) | 0.20% of contribution, subject to Min. ₹15/- and Max. ₹10000/- (Only for NPS All Citizen and Tier II accounts) | NA | NA | |||||
| Processing of Exit / Withdrawal | @0.125% of Corpus with Minimum ₹125/- and Max ₹500/- | NA | NA | |||||
| Trustee Bank | – | NIL | ||||||
| Custodian | Asset Servicing charges | 0.000000001770% per annum for Electronic segment & Physical segment | ||||||
| PF charges | Investment Management Fee | With effect from 1st April, 2021, following IMF shall be charged by the freshly appointed Pension Funds. | The IMF to be charged by the Pension Fund on the slab structure would be on the aggregate AUM of the Pension Fund under all schemes managed by Pension Funds. | |||||
| Slabs of AUM managed by the Pension Fund | Maximum Investment Management Fee (IMF) | These rates of IMF shall be reviewed by the Authority in a period of five (5) years from the date of implementation. | ||||||
| Upto 10,000 Cr. | 0.09%* | |||||||
| 10,001 – 50,000 Cr. | 0.06% | |||||||
| 50,001 – 1,50,000 Cr. | 0.05% | |||||||
| Above 1,50,000 Cr. | 0.03% | |||||||
| * UTI Retirement Solutions Ltd charges a fee of 0.07% under this slab. | ||||||||
| NPS Trust | Reimbursement of Expenses | 0.003% p.a | ||||||
| ** Persistency fee is payable to POPs if you are associated with that POP for more than 6 months in a financial year. | ||||||||
| * In the case of government employees, CRA charges are paid by the respective government. | ||||||||
| GST or other govt taxes as applicable, are additional. | ||||||||
| The revision of service charges for POPs on subscriber registration will be effective from 01st February 2022 | ||||||||
| ( Source : https://www.npstrust.org.in/) | ||||||||
Tax benefits to employees on Self-Contribution
Employees contributing to NPS are eligible for following tax benefits on their own contribution:
- Tax deduction up to 10% of salary (Basic + DA) under section 80 CCD(1) within the overall ceiling of Rs. 1.50 lakh under Sec 80 CCE.
- Tax deduction up to ₹50,000 under section 80 CCD(1B) over and above the overall ceiling of Rs. 1.50 lakh under Sec 80 CCE.
Tax benefits on partial withdrawal from NPS account
Eligible for tax exemption on the amount withdrawn upto 25% of the self contribution, on such terms and conditions as may be specified by PFRDA under section 10(12B).
Tax benefit on purchase of Annuity
Eligible for tax exemption on purchase of annuity upon attaining the age of 60 or superannuation under section 80CCD(5). However, the subsequent income received from annuity is subject to tax under section 80CCD(3).
Tax benefit on lump sum withdrawal
Eligible for tax exemption on lumpsum withdrawal of 60% of accumulated pension wealth upon attaining the age of 60 or superannuation under section 10(12A)
Tax Benefits to Corporates/ Employers
Eligible for tax deduction on the amount contributed as employer’s contribution towards the NPS account of employees, up to 10% of the salary (Basic + DA) of employer’s contribution as ‘Business Expense’ from the Profit & Loss Account under section 36(1)(iv)(a).
The tax provisions referred are from Income Tax Act, 196