{"id":286,"date":"2019-08-13T09:13:08","date_gmt":"2019-08-13T09:13:08","guid":{"rendered":"http:\/\/blog.budwisefunds.com\/?p=286"},"modified":"2020-12-07T15:35:37","modified_gmt":"2020-12-07T15:35:37","slug":"what-is-national-pension-scheme-a-complete-overview","status":"publish","type":"post","link":"https:\/\/budwisefunds.com\/blog\/what-is-national-pension-scheme-a-complete-overview\/","title":{"rendered":"What is National Pension Scheme? A complete overview !"},"content":{"rendered":"\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">NPS or National Pension Scheme is an old age security scheme which was launched by Government of India on 1<sup>st<\/sup> January, 2004. The scheme replaced the previously existing pension model which provides fixed pension to the employees based on their salary.<\/span><\/p>\r\n<p><strong><span style=\"font-size: 24px;\">Further Reading: <a href=\"https:\/\/bestpensionplans.in\/\">Best Pension Plans<\/a><\/span><\/strong><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">However, this new pension model is built on the concept of voluntary defined contribution wherein the pension amount will be decided based on the accumulated corpus at retirement. The scheme was open for subscription for the general public on 1<sup>st<\/sup> May, 2009. This allows every Indian citizen to effectively plan their retirement based on their risk appetite at a minimal cost.<\/span><\/p>\r\n<p><script async=\"\" src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script> <ins class=\"adsbygoogle\" style=\"display: block; text-align: center;\" data-ad-layout=\"in-article\" data-ad-format=\"fluid\" data-ad-client=\"ca-pub-6495755798120621\" data-ad-slot=\"6499025866\"><\/ins> <script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">PFRDA (Pension Fund Regulatory and Development Authority) is the regulator of NPS, which also appoints and regulates the PFM (Pension Fund Manager). Currently, there are 8 pension fund managers authorized by PFRDA, but however, only three among them are allowed to manage funds for both, the government and the private sector. This PFM are:-<\/span><\/p>\r\n<ul style=\"text-align: justify;\">\r\n<li><span style=\"font-size: 20px; color: #000000;\">LIC Pension Fund Ltd. (both)<\/span><\/li>\r\n<li><span style=\"font-size: 20px; color: #000000;\">SBI Pension Funds Pvt. Ltd. (both)<\/span><\/li>\r\n<li><span style=\"font-size: 20px; color: #000000;\">UTI Retirement Solutions Ltd. (both)<\/span><\/li>\r\n<li><span style=\"font-size: 20px; color: #000000;\">Birla Sun Life Pension Management Ltd.<\/span><\/li>\r\n<li><span style=\"font-size: 20px; color: #000000;\">HDFC Pension Management Co. Ltd.<\/span><\/li>\r\n<li><span style=\"font-size: 20px; color: #000000;\">ICICI Prudential Pension Fund Management Co. Ltd.<\/span><\/li>\r\n<li><span style=\"font-size: 20px; color: #000000;\">Kotak Mahindra Pension Fund Ltd.<\/span><\/li>\r\n<\/ul>\r\n<h2 style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><strong>BENEFITS OF <\/strong><\/span><strong style=\"color: #000000; font-size: 20px;\">NATIONAL PENSION SCHEME<\/strong><\/h2>\r\n<ul style=\"text-align: justify;\">\r\n<li>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>Low Cost <\/strong><\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">NPS is considered as the low cost pension scheme in comparison to those offered by insurance company and mutual fund schemes. The fund management charge is just 0.01% which is probably the lowest across any investment instrument; however, it is not the only charge which is to be paid.<\/span><\/p>\r\n<ul style=\"text-align: justify;\">\r\n<li>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>Portable<\/strong><\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">NPS is portable in the sense that a subscriber can invest through any of the POP-SPs branch or can also make contributions through eNPS i.e. online. Hence, a subscriber can operate his NPS account throughout the country without any hassle. Also, there is a provision of shifting NPS account to any other sector like from government sector model to private sector model and vice versa.<\/span><\/p>\r\n<ul style=\"text-align: justify;\">\r\n<li>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>Simple<\/strong><\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">To get started with investing in NPS, one has to open an account with any of the nearby POPs (point of presence) or can even open an account through eNPS by submitting the required documents.<\/span><\/p>\r\n<ul style=\"text-align: justify;\">\r\n<li>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>Voluntary Investment<\/strong><\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">An investor can change the contribution and can contribute it at any point in time during a financial year. However, one must remember that he has to contribute at least Rs 1000 in every financial year towards Tier I account while no minimum balance is to be maintained for Tier II account except for the initial contribution which is to be made at the time of registration.<\/span><\/p>\r\n<ul style=\"text-align: justify;\">\r\n<li>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>Flexible investment options<\/strong><\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">NPS offers a lot of investment option to its subscriber. The subscribers can choose among two available choices \u2013 Active choice or Auto choice. Apart from this, they can choose pension fund managers on their own and can switch their investments from one pension fund to another or one scheme to another.<\/span><\/p>\r\n<h2 class=\"entry-title\"><strong><span style=\"font-size: 24px;\">Also Read: <\/span><\/strong><a href=\"https:\/\/budwisefunds.com\/blog\/should-you-prepay-your-loan-first-or-invest\/\" rel=\"bookmark\">Loan or invest \u2013 Should you prepay your loan first or invest?<\/a><\/h2>\r\n<h2 style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><strong>ENTITIES RELATED TO NATIONAL PENSION SCHEME<\/strong><\/span><\/h2>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">There are several intermediaries which perform various kinds of functions and ensure smooth functioning of the NPS scheme.<\/span><\/p>\r\n<ul style=\"text-align: justify;\">\r\n<li>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>Annuity Service Provider<\/strong><\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">ASP or Annuity Service Provider is appointed by the PFRDA who is responsible for providing monthly pension to the NPS subscriber. The ASP aims to provide regular pension through their various schemes. An individual is required to purchase one annuity scheme from any of the ASP of his choice.<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">Currently there are only 5 ASPs appointed by PFRDA. These are:-<\/span><\/p>\r\n<ol style=\"text-align: justify;\">\r\n<li><span style=\"font-size: 20px; color: #000000;\">Life Insurance Corporation of India<\/span><\/li>\r\n<li><span style=\"font-size: 20px; color: #000000;\">HDFC Life Insurance Co. Ltd.<\/span><\/li>\r\n<li><span style=\"font-size: 20px; color: #000000;\">ICICI Prudential Life Insurance Co. Ltd.<\/span><\/li>\r\n<li><span style=\"font-size: 20px; color: #000000;\">SBI Life Insurance Co Ltd<\/span><\/li>\r\n<li><span style=\"font-size: 20px; color: #000000;\">Star Union Dai-Ichi Life Insurance Co Ltd<\/span><\/li>\r\n<\/ol>\r\n<ul style=\"text-align: justify;\">\r\n<li>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>Pension Fund Manager<\/strong><\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">These are the fund management companies who are appointed by PFRDA; and perform the duty of managing the subscriber\u2019s funds.<\/span><\/p>\r\n<ul style=\"text-align: justify;\">\r\n<li>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>Central Record Keeping Agency (CRA)<\/strong><\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">CRA is concerned with the maintaining of records of the NPS subscriber and it is also appointed by the regulator i.e. PFRDA.<\/span><\/p>\r\n<ul style=\"text-align: justify;\">\r\n<li>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>POP and POP-SP<\/strong><\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">POPs or Point of Presence are mainly commercial banks who act as the first point of interaction with the NPS subscribers and are appointed by PFRDA. The authorized branches of these POPs are called POP-SPs which are responsible for providing service to the customer and also act as collection point.<\/span><\/p>\r\n<ul style=\"text-align: justify;\">\r\n<li>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>NPS Trust and Trustee Bank<\/strong><\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">The NPS trust is responsible for managing the funds under NPS and the bank with whom Trust holds a bank account is known as Trustee Bank. Based on the instructions received from CRA, the trustee bank transfers the funds.<\/span><\/p>\r\n<p><script async=\"\" src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script> <ins class=\"adsbygoogle\" style=\"display: block; text-align: center;\" data-ad-layout=\"in-article\" data-ad-format=\"fluid\" data-ad-client=\"ca-pub-6495755798120621\" data-ad-slot=\"6499025866\"><\/ins> <script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script><\/p>\r\n<h3 style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><strong>HOW TO OPEN <\/strong><\/span><strong style=\"color: #000000; font-size: 20px;\">NATIONAL PENSION SCHEME <\/strong><span style=\"font-size: 20px; color: #000000;\"><strong>ACCOUNT AND ITS ELIGIBILITY<\/strong><\/span><\/h3>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">Any Indian citizen between 18-65 years of age can apply for NPS account either by visiting nearby POP-SP or through eNPS website directly. A unique PRAN (Permanent Retirement Account Number) is generated and allotted to each NPS subscriber. Once an account is opened, you will have to make an initial contribution which is minimum Rs 500 for Tier I account and minimum Rs 1000 for Tier II account.<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">Even NRIs between the age brackets of 18-60 years can also open an NPS account. Also, the scheme is also made available to poor people and people in the unorganized sector through Atal Pension Yojana.<\/span><\/p>\r\n<h3 style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><strong>TYPES OF <\/strong><\/span><strong style=\"color: #000000; font-size: 20px;\">NATIONAL PENSION SCHEME <\/strong><span style=\"font-size: 20px; color: #000000;\"><strong>ACCOUNT<\/strong><\/span><\/h3>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">There are two types of account which can be opened by an individual \u2013 Tier I and Tier II. Among these two Tier, I account is compulsory while the other is optional.<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><strong><img loading=\"lazy\" class=\"aligncenter wp-image-295 size-full\" src=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture6.png\" alt=\"TYPES OF NATIONAL PENSION SCHEME\" width=\"651\" height=\"252\" srcset=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture6.png 651w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture6-300x116.png 300w\" sizes=\"(max-width: 651px) 100vw, 651px\" \/>\u00a0<\/strong><\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><img loading=\"lazy\" class=\"wp-image-296 size-full aligncenter\" src=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture7.png\" alt=\"\" width=\"648\" height=\"440\" srcset=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture7.png 648w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture7-300x204.png 300w\" sizes=\"(max-width: 648px) 100vw, 648px\" \/><\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><img loading=\"lazy\" class=\"aligncenter wp-image-297 size-full\" src=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture8.png\" alt=\"TYPES OF NATIONAL PENSION SCHEME\" width=\"639\" height=\"436\" srcset=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture8.png 639w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture8-300x205.png 300w\" sizes=\"(max-width: 639px) 100vw, 639px\" \/><\/span><\/p>\r\n<p><strong><span style=\"font-size: 24px;\">Further Reading: <a href=\"https:\/\/npscra.nsdl.co.in\/all-faq-about-nps.php\" target=\"_blank\" rel=\"noopener noreferrer\">NPSCRA.NSDL<\/a><\/span><\/strong><\/p>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>INVESTMENT CHOICES<\/strong><\/span><\/h3>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">NPS provides its investors several investment options to choose from. There are mainly two broad options &#8211; Auto choice and Active choice. If the subscriber does not choose any of these, then the subscriber\u2019s money will be invested as per the default choice \u2013 Moderate Life Cycle Fund under Auto choice.<\/span><\/p>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>AUTO CHOICE (LIFECYCLE FUND)<\/strong><\/span><\/h3>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">Individuals who do not have any knowledge about how much should they allocate in each asset class and want to be free from all the hassles may choose this option. Under auto choice, the funds are invested in a lifecycle fund wherein the funds are invested across various asset classes (E, C or G) based on the chosen lifecycle and the age of the subscriber. There are three types of lifecycle funds which are made available to the NPS account holders. These are:-<\/span><\/p>\r\n<ul style=\"text-align: justify;\">\r\n<li>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>LC 75 (Aggressive Life Cycle Fund)<\/strong><\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">75% of the funds are invested in equities till 35 years of age which is gradually <strong>reduced every year<\/strong> with the age of the subscriber.<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><img loading=\"lazy\" class=\"wp-image-298 size-full aligncenter\" src=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture9.png\" alt=\"\" width=\"676\" height=\"139\" srcset=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture9.png 676w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture9-300x62.png 300w\" sizes=\"(max-width: 676px) 100vw, 676px\" \/><\/span><\/p>\r\n<ul style=\"text-align: justify;\">\r\n<li>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>LC 50 (Moderate Life Cycle Fund)<\/strong><\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">50% of the funds are invested in equities till 35 years of age which is gradually reduced every year with the age of the subscriber.<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><img loading=\"lazy\" class=\"wp-image-299 size-full aligncenter\" src=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture10.png\" alt=\"\" width=\"664\" height=\"91\" srcset=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture10.png 664w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture10-300x41.png 300w\" sizes=\"(max-width: 664px) 100vw, 664px\" \/><\/span><\/p>\r\n<h3 style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><strong>LC 25 (Conservative Life Cycle Fund)<\/strong><\/span><\/h3>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">25% of the funds are invested in equities till 35 years of age which is gradually reduced every year with the age of the subscriber.<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><img loading=\"lazy\" class=\"wp-image-300 size-full aligncenter\" src=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture11.png\" alt=\"\" width=\"669\" height=\"98\" srcset=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture11.png 669w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture11-300x44.png 300w\" sizes=\"(max-width: 669px) 100vw, 669px\" \/><\/span><\/p>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>ACTIVE CHOICE (INDIVIDUAL FUNDS)<\/strong><\/span><\/h3>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">Under the active choice, the subscriber gets 4 investment options \u2013 Equity (E), Corporate bonds (C) , Government securities (G) and alternative investments (A). The subscriber has full freedom to choose his asset allocation on his own. The subscriber can allocate his entire contribution towards C or G category, however, there are some restrictions for E category which is explained below:-<\/span><\/p>\r\n<ul style=\"text-align: justify;\">\r\n<li><span style=\"font-size: 20px; color: #000000;\">A subscriber is allowed to put maximum of 75% of the funds in equity till 50 years age.<\/span><\/li>\r\n<li><span style=\"font-size: 20px; color: #000000;\">The exposure will then have to be reduced by 2.5% every year till 60 years age.<\/span><\/li>\r\n<li><span style=\"font-size: 20px; color: #000000;\">After 60 years of age, exposure in equity is capped at 50%.<\/span><\/li>\r\n<\/ul>\r\n<h3 style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><strong>TAXATION BENEFITS\u00a0<\/strong><\/span><\/h3>\r\n<ul style=\"text-align: justify;\">\r\n<li>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>Under Sec 80 CCD (1)<\/strong><\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">Any salaried individual who is a subscriber of NPS can claim tax deduction up to 10% of gross income under Sec 80 CCD (1) with in the overall ceiling of Rs. 1.5 lac under Sec 80 CCE.<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><img loading=\"lazy\" class=\"wp-image-301 size-full aligncenter\" src=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture12.png\" alt=\"\" width=\"591\" height=\"147\" srcset=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture12.png 591w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture12-300x75.png 300w\" sizes=\"(max-width: 591px) 100vw, 591px\" \/><\/span><\/p>\r\n<ul style=\"text-align: justify;\">\r\n<li>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>Under Section 80CCD (1B)<\/strong><\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">All NPS subscribers are eligible for deduction up to Rs 50000 for the contribution made towards Tier I account. This deduction is over and above the ceiling of 1.5 lacs. Hence an individual would be able to claim deduction up to Rs 2 lacs in total by investing in NPS.<\/span><\/p>\r\n<ul style=\"text-align: justify;\">\r\n<li>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>Under Section 80 CCD (2)<\/strong><\/span><\/h3>\r\n<\/li>\r\n<\/ul>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">This section provides an additional deduction to the subscribers under the corporate sector. Under this, the contribution made by an employer up to 10% of the employee\u2019s salary is eligible for claiming tax deduction, <strong>without any upward limit<\/strong>. This does not come under the purview of 80 CCE which restricts the maximum deduction at 1.5 lacs.<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><img loading=\"lazy\" class=\"wp-image-302 size-full aligncenter\" src=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture13.png\" alt=\"\" width=\"428\" height=\"332\" srcset=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture13.png 428w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/Capture13-300x233.png 300w\" sizes=\"(max-width: 428px) 100vw, 428px\" \/><\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">As we can see that investment in NPS offers various tax incentives to its subscriber which makes it the best instrument for saving tax.<\/span><\/p>\r\n<h2 class=\"entry-title\"><strong><span style=\"font-size: 24px;\">Also Read: <\/span><\/strong><a href=\"https:\/\/budwisefunds.com\/blog\/credit-card-limit-how-issuing-companies-determine-your-credit-card-limit\/\" rel=\"bookmark\">Credit Card Limit \u2013 How Issuing Companies Determine Your Credit Card Limit<\/a><\/h2>\r\n<h3><span style=\"font-size: 20px; color: #000000;\"><strong>WITHDRAWAL\/EXIT POLICY FOR NATIONAL PENSION SCHEME<\/strong><\/span><\/h3>\r\n<h3>1. <strong>Upon Superannuation<\/strong><\/h3>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">On attaining 60 years of age, i.e. on maturity, the subscriber can withdraw up to 60% of the accumulated corpus in lump sum amount while the rest 40% has to be utilized for purchasing an annuity to receive monthly pension. The 60% corpus that can be withdrawn in lump sum has recently been made tax free while one has to pay tax on the pension to be received from the annuity.<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><strong>Also, if the total value of the corpus on maturity is less than or equal to Rs 200000 then the subscriber is allowed to withdraw 100% of the corpus in lump sum.<\/strong><\/span><\/p>\r\n<h3>2. <strong>Partial Withdrawal <\/strong><\/h3>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">NPS allows for partial withdrawals in case of certain cases like higher education of children, children marriage, treatment of critical illnesses and construction\/purchase of residential house. However, partial withdrawals are allowed only after 3 years of continuity and are capped at 25% of the contributions made by the subscriber. The withdrawn amount is tax exempted. Also, one is allowed to withdraw an amount only thrice in the entire tenure.<\/span><\/p>\r\n<h3>3. <strong>Pre- mature exit<\/strong><\/h3>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">NPS provides an option of pre-mature exit only after the completion of 10 years. The investor has to purchase an annuity for at least 80% of the value of the corpus in order to receive pension while the left amount can be withdrawn in lump sum which is 20%.<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">The amount withdrawn in lump sum is tax free, however, the income from annuity will be taxable in the hands of the subscriber as per one\u2019s tax slab.<\/span><\/p>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\"><strong>The subscriber is allowed to withdraw the whole corpus in lump sum if the value is less than or equal to Rs 100000.<\/strong><\/span><\/p>\r\n<p><script async=\"\" src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script> <ins class=\"adsbygoogle\" style=\"display: block; text-align: center;\" data-ad-layout=\"in-article\" data-ad-format=\"fluid\" data-ad-client=\"ca-pub-6495755798120621\" data-ad-slot=\"6499025866\"><\/ins> <script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script><\/p>\r\n<h3>4. <strong>Upon death of the subscriber<\/strong><\/h3>\r\n<p style=\"text-align: justify;\"><span style=\"font-size: 20px; color: #000000;\">In case of unfortunate death of the NPS subscriber, the whole corpus can be withdrawn in lump sum. The entire corpus will be paid to the nominee or legal heir of the subscriber and is exempted from tax.<\/span><\/p>\r\n<p><strong><span style=\"font-size: 24px;\">Further Reading: <a href=\"https:\/\/www.pfrda.org.in\/index1.cshtml?lsid=95\" target=\"_blank\" rel=\"noopener noreferrer\">PFRDA<\/a><\/span><\/strong><\/p>\r\n<p><img loading=\"lazy\" id=\"WhatisNPS\" class=\"alignnone size-medium wp-image-562 aligncenter\" src=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-300x88.png\" alt=\"\" width=\"300\" height=\"88\" srcset=\"https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-300x88.png 300w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-1024x299.png 1024w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-768x224.png 768w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-1536x449.png 1536w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-2048x598.png 2048w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-1200x350.png 1200w, https:\/\/budwisefunds.com\/blog\/wp-content\/uploads\/2019\/08\/download-pdf-button-1-1980x578.png 1980w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/><\/p>\r\n<p style=\"text-align: justify;\">\u00a0<\/p>\r\n","protected":false},"excerpt":{"rendered":"<p>NPS or National Pension Scheme is an old age security scheme which was launched by Government of India on 1st January, 2004. The scheme replaced the previously existing pension model&hellip; <\/p>\n","protected":false},"author":1,"featured_media":1072,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[12],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v19.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What is National Pension Scheme? 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