National Pension System
National Pension System (NPS)is a perfect solution for retirement planning. It provides old age income with reasonable market based returns. It is based on unique Permanent Retirement Account Number (PRAN) which is allotted to every subscriber for NPS which comes with the dual advantage of saving tax and assuring a regular income in the future. In case of any queries, please write to : firstname.lastname@example.org
NPS Account offers the following benefits:
- Exclusive Tax Benefits :
(1) NPS offers deduction of Rs 150,000/- on contributions made from your taxable income (under Section 80 CCD (1) of the Income Tax Act,1961) subject to
-10% of salary (Basic + DA) – for salaried employees
-20% of gross total income – for self-employed persons
Note: The maximum deduction from the taxable income is limited Rs.1.5 lac, as permitted under Sec 80CCE of Income tax Act,1961(2) Further an additional deduction from the taxable income to the extent of Rs 50,000 under Section 80 CCD(1B)
Deduction under Sec.80CCD (1) -Rs.1.50 lac
Deduction under Sec.80CCD (1B) -Rs.0.50 lac
Total Deduction -Rs.2.00 lac
- Regulated: NPS is regulated by PFRDA (Pension Fund Regulator under Govt. of India)
- Transparency: NPS account can be accessed online to make contributions and track investments.
Who can open an NPS Account?
- Any Citizen of India.
- Age between 18 years to 65 years.
- Applicant should be KYC compliant.
- Applicant should not have a pre-existing NPS Account.
The NPS is largely focused on one's retirement. While up to 60% of the maturity corpus can be withdrawn as a lump sum on maturity, the balance is compulsorily annuitized, i.e., balance is used to fund the annuity (pension) after retirement.
Subscribers have the option to open two types of NPS Accounts under the same Permanent Retirement Account Number (PRAN):
- Tier I: Contributions done to this account are eligible for additional tax deduction benefit of up to Rs. 50,000/- under section 80CCD (1B), over and above Rs.1,50,000/- u/s 80CCD(1). Withdrawals are restricted and subject to terms and conditions.
- Tier II: Subscribers can invest an additional amount in Tier II NPS Account. Subscriber is free to withdraw his entire accrued corpus under Tier II at any point of time. No tax benefits are available in this account.
Subscriber can enroll through the online application mode from the convenience of his home / office.The account can be opened by all Indian Citizens between 18 to 65 Years.
Steps for online account opening:
- Subscriber can enroll for NPS by clicking on 'Apply Now' option under NPS (National Pension System)
- Subscriber will get online form, which needs to be filled with mandatory fields.
Acknowledgement number for subscriber registration (account opening) will be generated. There will be provision to complete the registration (account opening) later based on acknowledgement number search.
- Subscriber's KYC will be done through PAN (OTP based authentication) and the address maintained with the existing account of ESAF Small Finance Bank. Please ensure the address mentioned is the same as maintained with the bank’s database.
- Subscriber enters remaining details like Bank details, scheme details, nominee details etc.
- Subscriber needs to upload photograph , signature ,Cheque and PAN
- Subscriber will enter the contribution amount (this is the amount subscriber wants to invest in NPS) and click for payment.
- Subscriber will be directed to online payment platform wherein subscriber will complete the payment through any net-banking option of an existing bank.
- On successful payment, PRAN will be allotted to the subscriber and PDF form will be generated based on data given. This can be saved for reference.
- The subscriber will also have an option of e-Sign. In case the eSign is successful there is no need to submit physical form.
NPS Account opening Contribution:
The NPS is largely focused on one's retirement. While up to 60% of the maturity corpus can be withdrawn as a lump sum on maturity, the balance is compulsorily annuitized, i.e., balance is used to fund the annuity (pension) after retirement. This annuity is fully taxable in the year of receipt as income from other sources.
NPS on mobile Application: A mobile app for NPS Subscribers called 'NPS by NSDL e-Gov' is available. The Subscriber can now view their NPS account, scheme holdings, latest Net Asset Value (NAV) and the total value of the schemes through this app. Subscribers can view the transaction statement for a particular financial year, as well as details of last five contributions. Subscriber can switch among fund managers, asset classes and change the allocation ratio.
Portability: With online accessibility, Subscriber can access their account across geographies. Each subscriber who joins the NPS is allotted a unique Permanent Retirement Account Number (PRAN) number. PRAN will remain the same throughout the life.
Pension Fund Regulatory and Development Authority (PFRDA) is a pension regulator which was established by the Government of India. PFRDA promotes old age income security by establishing, developing and regulating pension funds and protects the interests of subscribers in schemes of pension funds and related matters.
Central Recordkeeping Agency (CRA) - the sector regulator PFRDA has appointed National Securities Depository Limited (NSDL) & Karvy Computershare to offer NPS.
Point Of Presence (POP) - The first point of interaction between the subscriber and the NPS architecture.
POP shall facilitate the subscriber registration and submission of contributions. ESAF Small Finance Bank Ltd. is registered with PFRDA as a Point of Presence (POP).
Pension Fund Manager (PFM)
The contributions invested in NPS are managed by 8 Pension Fund Managers (PFM) appointed by PFRDA. The Subscriber can choose any one of the below given entities:
• HDFC Pension Management Company Limited
• Reliance Capital Pension Fund Limited
• UTI Retirement Solutions Limited
• Kotak Mahindra Pension Fund Limited
• LIC Pension Fund Ltd
• SBI Pension Funds Private Limited
• ICICI Prudential Pension Funds Management Company Limited
• Birla Sunlife Pension Management Limited
Annuity Service Providers
After completion of 60 years of age, the subscriber will have options to start Annuity. Below are Life Insurance Companies registered with PFRDA that offer Annuity:
• HDFC Standard Life Insurance Company Limited
• Star Union Dai-Chi Life Insurance Company Limited
• Life Insurance Corporation of India Limited
• ICICI Prudential Life Insurance Company Limited
• SBI Life Insurance Company Limited
|Intermediary||Charge Head||Service Charges*|
|Charges by Bank - Point Of Presence - POP (Maximum Permissible Charge for each Subscription)||Initial Subscriber Registration||Rs. 200/-|
|Initial Contribution||0.25% of the initial contribution amount from subscriber subject to a minimum of Rs.20/- and a maximum of Rs.25,000/-|
|Any subsequent Contribution|
|All Non Financial Transactions||Rs.20/-|
|Charges by Bank - Point Of Presence - POP (Through cancellation of Units)||Persistency||Rs. 50/- per annum|
|M/s NSDL e-Governance Infrastructure Ltd||Permanent Retirement Account Number (PRAN) Opening Charges||Rs.40/-|
|PRAN Annual Maintenance Charges||Rs. 95/-|
|Charge per transaction||Rs. 3.75/-|
|Fund Management Charges (FMC)||0.01% p.a. of total accumulated amount|
Subscribers have the option to select allocation pattern for their investment across various asset classes.
Active Choice: This option allows the subscriber the freedom to design the portfolio among 3 asset classes as below:
- Equity (E): This is a 'High risk – High Return' option as the funds are invested in equity. Subscriber can choose to invest up to 50% in this class
- Corporate Bonds (C): Funds are invested in fixed income bearing instruments which offer medium returns
- Government Securities (G): Funds are invested only in Government Securities
Auto Choice- Life Cycle Fund : In case 'Active Choice' as described above is not selected, the contribution funds will be invested in a pre-defined proportion depending on the age of the subscriber. The exposure will be higher in equity at a younger age and will be moderated progressively to get a balance among high, medium and low risk investment. For example, allocation in equity till the age of 36 years is 50% in "E" , 30% in "C" and 20% in "G" asset class. After the age of 36, asset allocation starts decreasing from "E" and "C" and increases in "G" till it reaches 10% in "E" & "C" and 80% in "G" asset class.