National Pension System / NPS Feature Benefits -

This article will shed light on the National Pension System and the benefits offered by it. We will also talk about other NPS Feature Benefits that are pertinent to the subject.

NPS Feature Benefits

What is meant by the National Pension System?

The National Pension System is primarily a savings scheme that is sponsored by the government to assist employees from various work sectors in saving a part of their earnings throughout their working period so that they don’t experience financial troubles after retirement. These employees can rely on the funds they have set aside through the National Pension scheme when they retire from their work.

This scheme was designed and administered by the Pension Fund Regulatory and Development Authority (PFDA) in 2013. In simple words, the National Pension scheme is a well-defined, market-linked, voluntary contribution scheme that is supervised by professional finance managers.

Benefits offered by the National Pension System:

The National Pension scheme has many features which benefit the employees who opt for it. Originally designed to benefit government employees, the NPS was later opened to all sections of employees from different sectors. Let us now talk about the various advantages you receive by availing of the National Pension scheme.

Voluntary nature- The NPS scheme is a voluntary scheme where employees can choose to make certain contributions towards accumulating a substantial corpus to rely on after retirement.

This scheme is available to every citizen of India aged between 18 and 60 years.

Flexible nature- The National Pension scheme offers flexibility to its customers by allowing them to save their excess funds in the scheme on a temporary basis through the Tier II account. Under this scheme, you can contribute amounts as low as Rs.500 a month and Rs.1000 a year. Here, you are also allowed to select your fund manager and keep tabs on your performance.
Portable convenience- Citizens who choose to avail of the National pension scheme can operate their accounts from any location in India. This is possible through extensive networks of Point of Presence (PoPs).
Independence- The National Pension System offers a sense of liberty to its customers by allowing them to make preparations for any financial inconvenience that they might face in the future. This scheme makes it possible for you to become financially independent even after retirement.
Security- The NPS scheme is a safe investment vehicle regulated by the government of India. It ensures the safe-keeping of your funds and other information.
Inexpensive and economical nature- One of the most important features of this scheme is that it allows low-priced investments to ensure the convenience of the subscribers. It can regulate automated asset allocation for every customer separately.

Tax benefits of NPS:

The National Pension System offers many benefits to its subscribers. Among these benefits, the advantage of tax deductions under the NPS system is of considerable significance. Let us now talk about the various NPS tax saving methods and factors.

Tax benefits under section 80C of the Income Tax Act:
Under this section, the National Pension scheme is listed as a principal investment option where you can avail of tax benefits. The NPS deduction limit under section 80C of the Income Tax Act is Rs.1.5 lakhs.
Tax benefits under section 80CCD (1B) of the Income Tax Act: Under this section, you are allowed to claim tax benefits and deductions up to Rs.50,000. This benefit is an additional tax benefit that is exclusively offered to NPS investors.
Tax benefits under section 80CCD (2) of the Income Tax Act:
Under this section, the funds contributed by the employers towards the investments of their employees are subject to NPS deduction and tax benefits of up to 14% in the case of central government contributions. The NPS deduction limit is 10% for other sectors.

From the above inference, it can be concluded that the tax benefits offered by the National Pension System can help you decrease your taxable income by a considerable amount. However, it is advised that the tax benefits offered by the NPS should not be the only reason for you to invest in it. The National Pension System offers several other benefits to its customers which should have your attention.

How can you register to avail the benefits of the NPS scheme?

If you are a working employee who wishes to avail of the several benefits offered by the National Pension System, you need to register yourself under the said system using the online portal, E-NPS. The steps to do so are as follows:

First, you need to visit the E-NPS portal that is available under the official website of the National Pension System.
Now, select the option that says ‘National Pension System’.
Under this section, you will find the option of ‘Registration’. You need to click on that option.
Once you do that, your online subscriber registration form will be displayed. You will be asked to select the options appropriate to your needs.
Now, under ‘Applicant Type’, you need to select ‘Individual Subscriber’; under ‘Status of Applicant’, you need to select ‘Citizen of India’.
Next, under the option of ‘Register With’, you can select the option that is suitable for you. You can choose to proceed with your PAN details as it will be more convenient.
Then, you need to select the ‘Account type’ you wish to proceed with. You can go for either tier I or both tier I and II.
In the next step, you need to provide your PAN details and then select your bank or PoP that is suitable for you.
Next, you will be asked to upload a scanned copy of your PAN along with a copy of a canceled cheque. The image format is required to be in .jpg, .jpeg, or .png format and the file size should be between 4KB and 2MB.
Now, you will need to upload a scanned copy of your photograph along with your signature. Both should be in the format and size mentioned above.
After you finish uploading your details, you will be redirected to a payment gateway. You need to proceed by paying the required fees via net banking.
Once you complete your payment, you will be provided with a newly generated Permanent Retirement Account Number.

This will conclude the process of registration for your National Pension System account.

NPS interest rate:

Every working individual should exercise accurate and meticulous planning in terms of finances to ensure a worry-free retirement period. As already discussed, NPS is a National Pension scheme launched by the government of India to aid in financial security in the post-retirement lives of individuals.

Now, the NPS interest rates are market-linked. This indicates that the NPS interest rates are subject to fluctuation depending on how the market is performing. According to previous reports, NPS interest rates have varied between 8% and 10%.

NPS calculator:

By using the NPS calculator, a subscriber of the National Pension scheme can easily determine the tentative pension amount and the lump sum amount that he should expect from his NPS investments. Based on your regular monthly contributions, percentage of the amount invested to purchase an annuity, and presumed rates of returns on investments, the NPS calculator indicates the pension amount and lump sum amount that you should expect on the maturity of his or her NPS investment plan.

Also read: What is the NPS/National Pension System?