National pension scheme (nps)
Features of National Pension Scheme and its tax benefits
Published on: Mar 3, 2016
Transcripts - National pension scheme (nps)
National Pension Scheme (NPS)
National Pension Scheme (NPS)
•It is a pension fund meant
for corporate employees
where the corporate entities
contributes on behalf of
• The main aim is to have a
pension the employees after
their retirement. This leads
to a robust retirement plan
and thus a security of
income at the old age as per
market driven returns.
• The Scheme does not guarantee or specify any return on
the investments. The returns are market driven and are
generated as per portfolio selection of an account holder.
Since the fund invest in asset classes like Government
Securities, Bonds and Equities, it gives returns just like any
othermutual fund scheme.
• The advantage here is that one can choose his /her ow
portfolio bifurcation as per his risk perception and still
enjoy a least fund management fees.
• Additionally, one can also avail a benefit of tax deduction
under Section 80CCD (1B) for Rs. 50000 invested in a year
over and above Rs. 1.50 lacs in section 80C. This means a
person covered under a tax bracket of 30% will save
Rs.15,450 towards tax payments.
• NPS allows flexibility to choose between active choice and
auto choice.In active choice, the subscriber may decide on
the percentage of investment between Corporate, equity and
debt, subject to maximum investment in equity at 50%.
• This Auto choice works as per the age of account holder. In
case where the age of account holder is less than 35 years,
then equity is given maximum priority to form the portfolio
and lesser contribution of debt scheme and followed by
• Where the account holder crosses the age of 35 years, the
proportion in government bonds will increase resulting in fall
of proportion in equity and debt. by the time the account
holder will reach an age of 60 years, the proportion of
investment will be 80% ending up with 80%.
• The 50% proportion allowed for equity are invested in
Nifty stocks in exactly the similar weight age which is
like investing Index funds which exactly replicate the
return of Nifty. This although cap the potential return
but restricts risks with a proper diversification between
• Further, one investing on regular monthly basis will get
further diversification by investment at different time
and different moods of the markets
• Flexibility to choose between fund managers. As of
now their are 8 fund managers, out of which one fund
managers need to be selected compulsorily.
• The leading fund management companies bid their
lowest rates. The fund management fees is as low as
0.0009% per annum as compared to 0.5% to 2% in a
normal mutual funds. You can also choose or switch
your fund manager once a year. These fund managers
• HDFC Pension Management Company Limited
• ICICI Pension Fund Management Company Limited
• Kotak Mahindra Pension Fund Limited
• LIC Pension Fund Limited
• Reliance Capital Pension Fund Limited
• SBI Pension Funds Private Limited
• UTI Retirement Solutions Limited
• Regulated by PFRDA, a regulator for the
pension sector in India
• Transparency in investment norms, constant
• Regular performance review of Fund
• Anyone between the
age of 18 years and 60
years can open this
• Even NRI are also
allowed to open an
account with National
• For getting enrolled for NPS, a Composite Registration Form (UOS-S1)
is required to submitted at Point of Presence (POP) or Point of Presence
– Service Provider -Authorized branches of POP for NPS (POP-SP) near to
• This list of POP Service Providers is readily available at PFRDA website
www.pfrda.org.in. Once enrolled, you will recieve a welcome kit
containing a PRAN card which you need to keep for all future references.
• Their is a minimum contribution of Rs.6000 per annum however no
limit on the maximum contribution. This amount may be deposited in
one or more transactions. The maximum cash deposit allowed in the
scheme stand at Rs. 25,000 per transaction.
• NPS account is completely portable and may be
operated from anywhere in the country. One can also
track all the transaction online through CRA system.
• The nomination facility is available with the NPS
account as such a nominee is entitled to get accrued
amount after the death of account holder.
• A transaction charge to the extent of Rs. 20 or 0.25%
(whichever is higher) is levied on each contribution. So
investing a sum of Rs. 500 every month may not be a
good idea since you will Rs 20 each tim, That come to
4% of the amount.
• The scheme is an ideal fit for the people
who are looking for retirement plan and are
investing mutual funds or fixed deposits for
• Not only, here they will bear a lower cost
but also avail the tax benefit while
contributing and maintaining this fund.
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