Employees in the private sector till 2009 faced distinct risks post-retirement as there was no source of fixed income for them with low risks. However, government employees enjoyed the pension scheme, which let them get a fixed amount after their retirement, as an initiative from the government since 2004.
If you are searching for what NPS scheme is, this article is the right place to guide you through its nuances.
National Pension Scheme or NPS is a government-sponsored pension scheme. It is, in essence, a long-term voluntary investment plan. In 2009, it was opened up to all Indian citizens with certain eligibility criteria by the Pension Fund Regulatory and Development Authority (PFRDA). It allows subscribers to contribute regularly to a pension account while they are working. The individual can choose an amount as necessary or suitable.
If you are an NPS account holder, you can withdraw an amount of the corpus and will continue receiving the remaining amount through a monthly pension after retirement.
In an NPS account, subscriber contribution is invested into various debt and equity instruments, and its returns depend on the performance of these investments, and of course, market conditions.
NPS was first introduced in 2004 with the object of providing retirement income to all citizens. It is open to all Indian citizens (except armed forces) between 18 and 60 years of age.
Some core objectives of NPS are:
Following are the noteworthy features of NPS:
NPS eligibility can be broadly categorised into 2 models.
In this case, eligibility criteria are:
One needs to be a citizen of India; residing and non-residing residents are both included.
The age of the applicant during the time of submission of application documents needs to be between 18 and 60 years.
All applicants need to comply with Know Your Customer (KYC) regulations as mentioned in the Subscriber Registration Form.
Submission of all required documents for KYC verification is mandatory.
This model is available to entities under:
NPS is a market-linked scheme and is one of the best retirement-planning schemes since its introduction in 2004.
Individuals in the following categories can find maximum benefits from NPS:
All salaried individuals who are not eligible for a pension from their existing employer can secure their post-retirement regular income source.
It is also ideal for people who do not have a high-risk appetite but looking for more interest than other traditional tax-saving investments.
NPS is also beneficial for individuals looking to make a low-risk investment that can provide a regular annuity.
With options to save up to ₹2 lakhs in taxes as per Section 80CCD (1) (Rs 1.5 lakhs) and Section 80 CCD (Rs 50,000) of the Income Tax Act, it is an excellent tax-saving investment.
Are you thinking, ‘can an NRI invest in NPS?’ If so, you should know that any individual can subscribe to NPS and open a pension account through eNPS with either his/her Aadhaar card or PAN card and a bank account. Moreover, NRIs cannot subscribe to NPS in the Tier II category.
Eligibility requirements for NRIs to open NPS account include:
NPS is an ideal investment option for people with a low-risk appetite and looking for fixed income reliability post-retirement. Further, since it is a regulated investment option, it is a secured income instrument for the long term for salaried individuals.
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Disclaimer: This information is added only for informative purposes and collected from different sources across the Internet. Digit Insurance is not promoting or recommending anything here. Please verify the information before making any decisions.
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