A central government employee who joined on or after 01/01/2004 comes under New Pension Scheme.
NPS Features:Pension fund regulatory and Development Authority (PFRDA) has been established by the Government of India, Ministry of Finance vide notification F.NO. 5/7/2003-ecb & PR dated 10th October 2003 to promote old age income security. The government authorized PFRDA vide Ministry of finance, Department of Financial services letter No. 11(11)/2008-pr dated 29th July 2008 to extend NPS on a voluntary basis to all citizens of India Including workers of unorganized sector.
NPS is now available to all citizens of India with effect from May 1, 2009, other than Government employees already covered under NPS.
Two Types of Accounts
1. Tire I Account.
2. Tire II Account.
Details of Tire I Account
Who can Join ?
A citizen of India , whether resident of Non Resident of India, subject to the following conditions.
Should be between age of 18 and 55.
Should comply with the Know Your Customer (KYC) norms as detailed in the subscriber registration form.
Who cannot Join
Individuals who are not granted an 'order of discharge' by a court.
Individuals of unsound mind.
Pre-existing account holders of NPS.
How to enroll in NPS?
To enroll in NPS , you need to submit the Registration Form to Post office or any other POP-SP. The list of POP-SPs is available in the website: http://www.pfrda.org.in.
NRIs should have an account with the bank based in India to open an account under NPS.
After the account is opened, CRA shall mail a "Welcome Kit" containing the subscriber's unique Permanent Retirement Account Number (PRAN) and the complete information provided by the subscriber. A telephone password(TPIN) which can be used to access the account on the call centre number (1-800-22220808). An IPIN(Internet Password) will also be given for accessing on the site www.npscra.nsdl.co.in.
Minimum Amount per contribution: 500.
Minimum Contribution Amount per year: 6000.
Minimum Number of contributions per year: 4.
The subscriber can contribute the amount through cash, local cheque or demand draft.
What are the benefits of Joining New Pension Scheme ?
a) It is voluntary-NPS is open to every Indian citizen. You can choose the amount you want to set aside and save every year.
b) It is simple. All you have to do is to open an account with any POP and get a PRAN.
c) It is flexible. You can chose your own investment option and pension fund and see your money grow.
d) It is portable. You can operate your account from anywhere in the country.
e) It is regulated. NPS is regulated by PFRDA, with transparent investment norms and regular monitoring and perfomance review of fund mangers by NPS trust.
On attaining Normal Retirement age (NRA) of 60 years you will be required to compulsorily annuitze at least 40% of your wealth and the remaining 60% can be withdrawn as a lump sum sum or in a phased manner.
Minimum 10% of the pension wealth should be withdrawn every year.
Any amount lying to the credit at the age of 70 should be compulsorily withdrawn in lump sum.
If withdraw any time before 60 years of age: in such case, you will have to compulsorily annuitze 80% of your accumulated pension wealth. The remaining 20% can be withdrawn as a lump sum.
Tax benefits of NPS
Tax benefits are applicable as per the income tax act 1961, as amended from time to time.
NPS offers two approaches to invest money.
1. Active Choice
2. Auto Choice
In active choice you will have the option to actively decide as to how your NPS pension welath is to be invested in the following 3 options.
1. Asset Class E: Investment in predominantly equity market instruments.
2. Asset Class C: Investments in fixed income instruments other than government securities.
3. Asset Class G: Investments in Government securities.
You can choose to invest your entire pension wealth in C or G asset classes and up-to a maximum of 50% in equity (Asset Class E). In case you decide to actively exercise your choice about investment options, you shall be required to indicate your choice of pension fund from among the six pension funds appointed by PFRDA.In case you do not indicate any choice of PFM, your form shall not be accepted by the POP-SP.
NPS offers an easy option for those participants who do not have the required knowledge to manage their investments. In case you are unable to exercise any choice as regards asset allocation, your funds will be invested in accordance with the auto choice option. You will however be required to indicate your choice of PFM.At the lowest age of entry (18 years) the auto choice will entail investment of 50% of pension wealth in "E" class, 30% in "C" classs and 20% in "G" class.
The subscriber will initially be allowed only one scheme preference/switch request in May of each Year.
Terms and Conditions regarding NPS
The subscribers personal information shall not be disclosed to a third party without the express or impled consent of the subscribers.
If the subscribers citizenship status chagnes, his/ her account under NPS would be closed.
If the subscriber contributes less than Rs. 6000 in a year then he would have to bear a default penalty of Rs. 100 per year of default and the account would become a dormant.
In order to reactivate account, the subscriber would have to pay the minimum contributions along with penalty due for the period of dormancy.
The dormant account shall be closed when the account value falls to zero.
Risks from NPS
1) There are no guarantees on investment. NPS is defined contribution plan and the benefits would depend upon the amounts of contributions invested and the investment growth up to point of exit from NPS.
2) Value of your investments in NPS may go up or down depending upon the forces and the factors affecting financial markets in general.
3) Tax laws may change, affecting the return on Investment (ROI).
Download forms related to NPS
Contribution Payinslip NCIS
PRAN Registration Form.
NPS Subscriber Registration Form.
Subscribers Grievance Registration form
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