The National Pension System (NPS) is a voluntary, defined contribution retirement savings plan that enables subscribers to make the best decisions for their future by saving consistently throughout their working lives.
Except for members of the armed services, this program is open to employees from the public, private, and unorganized sectors. The program encourages employees to contribute to a pension account at regular periods throughout their careers. After they retire, subscribers can withdraw a certain amount from the corpus. After retirement, you will get the remaining amount as a monthly pension if you have an NPS account.
With tax incentives, the plan is portable across occupations and places.
Up to Rs. 1,50,000 – u/s 80CCE (individual tax limit)
Up to Rs. 50,000 – u/s 80CCD(1B) (individual tax limit)
Up to 10% of Basic Salary – u/s 80CCD(2) (Through Employer contribution)
Here are some aspects to bear in mind while opening an NPS account:
Age Factor– The PFRDA has also extended the age limit for Indian citizens who can apply for NPS under the new user-friendly rules. The scheme is open to all citizens between the ages of 18 and 70, regardless of their gender or income.
PRAN Account– Individual subscribers are given a unique identifying number called a Permanent Retirement Account Number to make NPS simple and convenient (PRAN). Individually, an account can be opened for as little as Rs. 500. Individuals must make a minimum annual contribution of Rs. 1000 without any upper limit.
There are no restrictions on payment methods, and subscribers can make contributions via checks, cash, DDs, or Fund Transfer through PAN India. The biggest benefit is that PRAN can be accessed from anywhere because of the online platform.
Pension Fund Manager: The regulator appoints Pension Fund Managers to prudently manage subscriber funds through investments in a variety of asset classes. They are scrutinized and inspected, and their performance is regularly monitored by the regulator.
Early Withdrawal: To make the NPS more user-friendly, the PFRDA included the ability to withdraw funds early in the event of unforeseen circumstances. Subscribers who are not interested in an early withdrawal and wish to wait until they reach the age of 60, can withdraw a lump sum and receive a deferred pension.
Enhancement in the Investment period– After their term of investment has ended, NPS subscribers can prolong the tenure of their plan. Higher Corpus can be accumulated by the subscriber if they wish to stay invested for an additional period. Subscribers can now postpone the purchase of an annuity for up to three years once they turn 60 years old or reach the age of superannuation.
Thus, NPS proves to be a viable option as it now presents an opportunity for people who may have missed out on the chance to build a retirement fund earlier.