To encourage more people to join the The National Pension system PFRDA has lowered the minimum annual contribution to Rs.1,000= to keep the account active. Earlier, a subscriber had to contribute at least Rs. 6,000=in a financial year to keep the Tier 1 account running. NPS is structured into two tiers. Tier 1 account is
NPS aims to provide social security after retirement in the form of monthly pension and lump sum withdrawal. NPS offers two types of accounts –Tier one account and Tier two account.Tier one is a permanent retirement account in which the contributions are deposited and invested as per the option of the subscriber.To bring in liquidity
1) Very long lock-in period All tax saving instruments have lock-in periods, but none as long as that of the NPS. The lock-in period of the PPF is only seven years, after which you can make partial withdrawals and a full withdrawal can be made after 15 years. An individuals own contribution to the EPF
For those investing in the NPS, choosing the right pension fund is critical—not only because that the returns should be high but also that the investor will not be able to change the fund for one year. The NPS funds of ICICI Prudential Pension Fund have been top performers in past 3-year and 5-year periods.
Last year, the government announced an additional deduction of Rs.50,000=(under new section 80CCD) for investment in the NPS. This year’s budget has made the scheme more attractive by making 40% of the corpus tax free on maturity.Moreover, opening an NPS account has now become more easy.You can take the online route to open an NPS
Earlier under the NPS, 40% of the corpus had to be mandatorily converted into annuity scheme and 60% would have been taxed. Now 40% will still be converted into an annuity , 40% can be withdrawn tax free and a tax will have to be paid on the remaining 20% –this is better than earlier.
The popularity of this scheme has increased manifold. Currently, NPS has more than 1.5 crore subscribers with total asset under management of more than Rs1.09 lakh crore compared to a mere 67.11 lakh subscribers in 2014. NPS is a flexible retirement savings scheme which offers both a lump-sum amount and monthly pension i.e. a fixed
Under the existing provisions of the Income Tax Act, tax treatment for the National Pension Scheme referred to in Section 80 CCD is Exempt, Exempt and Tax (EET) ii.e., the monthly/ periodic contributions during the pension accumulation phase are allowed as deduction from income for tax purposes;the returns generated on these contributions during the accumulation
An annuity , as the name suggests, is a guaranteed amount paid for a subscriber’s life time in return for a one time payment.There is an option to extend the pension to the spouse and even return the corpus to the child, but this lowers effective returns. For example, Life Insurance Corporation of India offers
The NPS assets under management has registered nearly 37% growth to 1.1 lakh crore as on December 31 from Rs. 80,855 crore at end March 2015. The total number of subscribers under NPS has increased 32% from 8.74 million as on March 31 , 2015 to 11.54 million in the current financial year up to