The NPS or the National Pension Scheme is a contribution scheme launched by the Indian government, which offers a large variety of investment options to employees. The scheme helps individuals make decisions with regards to where they should invest their pension wealth. The National Pension Scheme's main objective is to lower the liabilities of the Government of India with regards to total pension as well as to ensure that the country's citizens would earn a stable income following their retirement along with helping them earn decent returns on their investment.
The NPS was launched on the 1st of January 2004 and was aimed at individuals newly employed with the central government, but not including ones in the armed forces. From the year 2009 however, the NPS was made open to every Indian citizen between the age of 18 and 60.
Unique Permanent Retirement Account Numbers (PRAN) are allocated to each subscriber under the NPS at the time of their joining. Subscribers are also allocated two accounts, which they can access at any time.
- Tier I Account - Under this account, withdrawals are not allowed. It is solely meant for savings after the subscriber's retirement.
- Tier II Account - Under this account, a subscriber is free to make as many withdrawals as he or she likes at any time, similar to a regular savings account.
- Swavalamban Account - In this account the Indian government contributes a sum of Rs 1,000 every year over the initial four years. The purpose of this account is to provide encouragement for workers of poor economic standing.
Documents to be submitted for NPS
Any subscriber needs to submit the following documents to get enrolled into the National Pension Scheme:
- Proof of address ( Any one of the following documents are accepted - Passport , Ration Card with photograph, Bank Passbook , PAN Card, Aadhar Card and Photo identity Card etc. )
- Proof of Identity (PAN Card, Aadhar Card and Photo identity Card, Passport, Ration Card with photograph, Job Card issued by NREGA, Electricity Bill, Water Bill and Bank Passbook etc. – any one of the these documents will do.)
How much contribution do I make?
The following contributions are accepted by the National Pension Scheme:
- A subscriber needs to make a minimum contribution Rs. 6000 per year. The minimum one time contribution is Rs. 500. These contributions are applicable for Tier-I accounts.
- Similarly, for Tier-II accounts, a subscriber needs to make a minimum contribution of Rs. 2,000 annually, and Rs. 250 at one time.
Funds can be contributed either via cheque or cash.
Benefits of investing in NPS
By investing in the National Pension Scheme, a subscriber can enjoy the following benefits:
- It is a voluntary scheme and open for all India citizens falling between the age group of 18 to 60 years.
- The scheme comes with a lot of flexibilities which allow you to choose your investment options.
- You can also switch between different investments funds.
- The NPS account can be operated from anywhere in India.
- The plan involves transparent investment norms.
- It helps you plan your retirement and you can be sure of receiving assured returns at retirement.
- The subscriber can get tax benefits on the contribution made towards this scheme under section 80C of the Indian Income Tax Act.