New Delhi: National Pension System was rolled out by the government of India in 2009. This scheme is administered by Pension Fund Regulatory and Development Authority (PFRDA). All Indian citizens between the age of 18-65 years can open an NPS account. NRIs can also open an NPS account.
A unique Permanent Retirement Account Number (PRAN) is alloted to the subscribes when they open an NPS account.There are two types of account which can be accessed through PRAN - Tier I account and Tier II account. The Tier I account is a non-withdrawable account. Tier II account is a voluntary savings account and the subscriber is allowed to withdraw money whenever they want.
Here are the NPS details you need to know:
Points of Presence (POPs) are the first points of interaction of the NPS subscriber with the NPS system. The authorized branches of a POP, called Point of Presence Service Providers (POP-SPs), will act as collection points and extend a number of customer services to NPS subscribers.
Subscription process: Any Individual between the age of 18 and 60 years can register as a subscriber in NPS by the following procedure:
1. Submit duly filled UOS S1 form to open a Permanent Retirement Account (PRA) (Tier I and/or Tier II) in NPS with other supporting KYC documents to POP-SP.
2. For only Tier II account, an individual with an active Tier I account needs to approach the associated POP-SP and submit a copy of the PRAN Card along with UOS-S10 form (Tier II activation form)
3. POP-SP will validate the form and provide a receipt number to the subscriber.
Withdrawal Rules: A subscriber who wishes to exist from NPS has to submit a withdrawal application with all the documents required. The application has to be submitted to the concerned POP who would then authenticate the documents and forward the claim to CRA M/s National Securities Depository Limited (NSDL). Once the application is processed by CRA, your account will be setlled and you can get your money.
Tier-I The money can only be withdrawn if exit condition prescribed under NPS are met.
Tier-II: Subscribers can withdraw their savings whenever they wish to.
Benefits of NPS:
1. NPS is transparent and cost effective system wherein the pension contributions are invested in the pension fund schemes and the employee will be able to know the value of the investment on a day to day basis.
2. Each employee is identified by a unique number and has a separate PRAN which is portable which means it will remain the same even if an employee gets transferred to any other office.
3. NPS is regulated by Pension Fund Regulatory and Development Authority - External website that opens in a new window, with transparent investment norms & regular monitoring and performance review of fund managers by NPS Trust
Tax Benefits: The tax treatment for contribution made in Tier I account is Exempted-Exempted-Taxed (EET) which means the amount contributed is entitled for deduction from gross total income upto Rs 1.00 lakh (along with other prescribed investments) as per section 80C (as per the provisions of the Income Tax Act, 1961 as amended from time to time).The appreciation accrued on the contribution and the amount used by the subscriber to buy the annuity is not taxable. Only the amount withdrawn by the subscriber after the age of 60 is taxable.