PFRDA (Pension Fund Regulatory and Development Authority), India has opened National Pension System (NPS) / New Pension Scheme to all Indian citizens starting today, on 1st May, 2009.
Its a safe, flexible and portable scheme introduced by Indian Government’s cell PFRDA; to replace the existing System of Pension System in the country and to provide income security after retirement.
PFRDA was established by the Government of India to promote old age income security by establishing, developing and regulating pension funds, to protect the interests of subscribers to schemes of pension funds.
Any Indian citizen will be able to start a National Pension System account and can start investing any amount up for a pension.
Under this scheme, an investor can deposit their contributions in Bank Branches and Post offices all over the country. Unlike EPF (employee provident fund schemes), there will be only one number allotted to each investor, In case of change of job or location of job, it can be easily transferred to another branch. Each Investor will be allotted a unique 16 digit Permanent Retirement Account Number (PRAN) it will valid for life like current PAN number. There will be no need to open a new account every time you change job or location unlike the current EPF (Employee Provident Fund)
In starting, there will be 23 Points of Presence (POP) including PSU banks and post offices, and they will be provide account opening and other transactions facility. Following is the participating POP list: Allahabad Bank, Axis Bank, Bajaj Allianz General Insurance Co, Central Bank of India, Citibank, CAMS (Computer Age Management Services), ICICI Bank, IDBI Bank, IL&FS Securities, Kotak Mahindra Bank, LIC (Life Insurance Corporation of India), Oriental Bank of Commerce, Reliance Capital, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, SBI (State Bank of India), State Bank of Indore, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore, South Indian Bank, Union Bank of India, UTI.
There will be multiple choices of investment and pension fund managers. All records will be kept by Central Record-keeping Agency (CRA). Central authorities and fund manager will be providing performance reports and NAVs (Net Asset value) regularly, so investor can track and invest accordingly. In Starting, NAVs will be declared once every year and switching fund manager will be allowed only once a year.
Currently seven fund managers have been chosen LIC Pension Fund Limited, SBI Pension Funds Private Limited, IDFC Pension Fund Management Company Limited, Kotak Mahindra Pension Fund Limited, Reliance Capital Pension Fund Limited, UTI Retirement Solutions Limited and ICICI Pension Fund Management Company Limited that will manage investment money for NPS.
Fund Managers will charge very low fund management charges as compared to mutual funds.
Individual will also have choice to choose from 3 different asset classes: equity (E type), Govt securities(G Type) and Credit Risk-bearing Debt/fixed income based investments (C Type).
Active Choice investment: Investor can mix these three types also as per his choice. Invester actively decide as to how NPS investment is divided into 3 options (E, C and G).
Auto Choice investment: Another option will be Auto Choice life cycle fund and the investment allocation will be done based of investor’s age. In this scheme, equity portion (Asset class E) will be 50 per cent till age 35 after which it will reduce 2 per cent per year until it becomes 10% by age 55. Credit risk portion (Asset class C) will be 30 per cent till age 35 after which it will reduce 1 per cent per year until it becomes 10% by age 55.
Investor will have option of investing monthly/quarterly, but minimum 4 investments in a year will be compulsory.
As per the notification by PFRDA, Currently only half of investment can go into equities, even if investor chooses the equities type funds. This limit will only be reviewed after a year. Deepak Parekh had suggested PFRDA to allow public to invest all saving in equities but board was not ready to do that.
There will be regular account statements and information desks to keep information transparent.
Govt has extended Swavalamban initiative under which it will contribute 1,000 Rs per year (for a period of four years) to every national pension system (NPS) account opened this year with at least a matching contribution from the subscriber.
Biggest problem is investment is that, a person has to visit personally to POP office every-time he/she need to make contribution. There has been some respite to investors as some of the POPs have started taking deposits online.
India’s largest bank State Bank of India has started taking NPS contribution online through the onlineSBI login account. If you have internet banking of SBI, you can make payment to NPS online. You can check NPS contribution section under Payments/Transfers tab after login.
If you have NPS account opened with ICICI and you also have bank account with ICICI, you can also transfer amount online to NPS account. You need to add NPS account as biller in online ICICI account. You can go to ‘Bill Pay’ section and add a biller under Pension category. Once biller is added you can make payment to this account. The facility for online contribution payment towards national pension system (NPS) is allowed only for NPS accounts opened through ICICI Bank. Your registration for NPS contribution will be cancelled if the NPS account has not been opened through ICICI Bank. Any payments made towards such account will be reversed within three working days. Please make contribution towards the above NPS account only after you have received confirmation for registration into the mail box of your Internet Banking account.
NPS account holders can also invest through SIP or in lump-sum from their ICICI securities account (demat and online share trading account). But as this account is held by limited Indians, its of not much help.
CAMS service for online NPS payment has not started yet and page on their site shows under construction.For Govt Employees:
All new government employees (central and state) will no longer have GPF accounts and NPS account will be mandatory for them. So all who have joined government services after 1st Jan, 2004, will have NPS account.
NPS will work on defined contribution basis and will have two parts – Part I and Part II.
Tier I – Mandatory non-with-drawable Pension Account – Monthly contribution will be 10 percent of basic salary and equal amount will be deposited by Govt. This amount will be kept in a non withdrawal Pension Tier I account.
Tier II – Voluntary with-drawable Savings Account – It will be voluntary tier-II with-drawable account from which individual can withdraw money anytime without giving reason. There will not be any contribution from Govt. side in this account.
Govt Employee can exit after age of 60 years from Tier I Scheme and it will be mandatory for him to invest 40% of pension amount to purchase an annuity through a Life Insurance Company, It will provide pension for the life time. In case of employee wants to leave NPS before age of 60, the mandatory annuity will be 80 per cent of the pension amount.
For account opening and issuance of PRAN : 50 Rupees
Annual maintenance charge: 350 280 Rupees per year
Initial subscriber registration charge: 100 Rupees
Transaction charges and contribution upload– 0.25% of the amount, subscribed by the NPS subscriber, subject to minimum of Rs.20 and a maximum of Rs. 25000.
Fund management charge: 0.0009% per year on the fund value.
Fund switch charges: 20 Rupees.
Any other transaction not involving a contribution from subscriber – Rs 20
As of now, this charge appears to be high. Considering 12 transaction a year (one every month), investor has to pay 470 Rs a year. That’s on higher side. These charges will reduce in coming years, as number of subscriber increases.
PFRDA may ask Government to partly pay the maintenance cost to reduce overall cost for investor.
The bad part about NPS is that the returns will be fully taxable not like EPF and PPF. It will come under exempt-exempt-taxed (EET) regime, the amount would be taxed at the time of withdrawal. NPS will not attract any Security Transaction Tax (STT) and Dividend Distribution Tax (DDT).
However PFRDA has suggested government to exempt scheme from tax, but that decision will only be taken by new government.
Update: As per new notification by Finance ministry, under Direct Tax Code (DTC), NPS will also come under EEE and withdrawal will also be non-taxable from 2011. So national pension system could become the best long-term savings option.
From April 1, 2011. Employer contribution from employer towards NPS will not be included in the Section 80 C deductions (Like what happens in case EPF currently). So if employer contributes 50,000 to your account and you contributes same amount, Your 50000 will be available for exemption under 80-C and there won’t be any income tax on rest 50,000 deposited by employer. This increasing your overall deduction claim.
NPS is available at selected Service Provider (SP) branches of various Point(s) of Presence, Click on link for each POP for branches address. You may also view list by state-city on this link: POP/POP-SP location details.
For more information, application form & offer document, walk into your nearest Service Provider branch of the above-mentioned Point(s) of Presence.
NPS (New Pension Scheme/System) - Application Form (456.0 KiB, 19,346 hits)
New Pension Scheme/System (NPS) - Offer Document (2.9 MiB, 14,183 hits)
New Pension System (NPS) - Welcome Kit (1.2 MiB, 9,388 hits)
NPS (New Pension Scheme) - Investment Guidelines (73.8 KiB, 10,652 hits)
New Pension System (NPS) Contribution Instruction Slip (NCIS) (15.1 KiB, 8,649 hits)
NPS Scheme Preference Change/Switch form (26.9 KiB, 3,485 hits)
Swavalamban Yojana Declaration Form (139.7 KiB, 3,662 hits)
Subscriber request form to change Point of Presence (POP) (63.3 KiB, 3,443 hits)
Subscriber request form to change POP-SP (16.4 KiB, 3,696 hits)
UOS-S12 Withdrawal form for Tier II account under NPS (47.0 KiB, 3,312 hits)
Request form for change in signature and/or change in photograph (12.8 KiB, 3,059 hits)
Request for Activation of Tier-II account under New Pension System (NPS) (215.3 KiB, 3,866 hits)
S1 - Subscriber Registration form to get PRAN (61.3 KiB, 3,621 hits)
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View Comments
i am hp govt employee. My contribution towards nps for the 2011-2012 is rs 25164. How much amount comes under income tax rebate.
@Avtar Singh
Whole amount deposited as your contribution qualifies for tax saving under section 80C.
**1.If I am contributing about 6000 year(my age 32) and how long should I contribute? I understand there will be no govt contribution.It looks government do not care for the non govt employees.but we are truly citizen of India.cannnot be benefited even by this NPS too!.2.if i am contributed about 2 lacks in total how much I will be receiving pension each month(after 60 years).3.Is there tax exemption if i withdraw it in one time?
4.Is it mandatatory for my employer to contribute same amount or I can only contribute if my employer not interested to put money on NPS ?** hope i can get some ideas from u.thankyou
@Hari
You would need to contribute every year till 60 years age.
Pension and value of investment would depend on multiple factors. Which portfolio you have chosen. Whats the ratio of equity, debt and bonds. which fund manager you have chosen etc.
Amount cannot be withdrawn fully before 60 years and some part even after that. Some part has to be used in buying an annuity scheme which will pay pension for you.
Its not mandatory for your employer to contribute. You can invest even if you are not employed or run your business.
@Pankajji
As you stated that employer contribution is not compulsory & even businessman can also invest in this scheme.
if i am employed with private organisation & i would like to invest, can i directly go and open NPS account & claim the whole amount in TAX rebate?
@Mitul
You can open NPS account yourself and contribute amount into that account. Tax benefit would be available for this contribution u/s 80C.
Maximum total exemption limit would be 1 lac u/s 80C.
@Pankajji,
Thanks for your reply.
can't i take benefit of section 80CCD(2) which is above 80C?
NPS doesn't fall under 80CCD(2)?
@Mitul
Total deduction available under 80C, 80CCC and 80CCD cannot exceed one lakh rupees.
@Pankajji
I read one article in TOI last week which was stated that NPS (80CCD(2)) investment is above 1 Lac limit of 80C & 80CCC.
could you get me clarify here?
Thanks.
@Mitul
I believe you are talking about this article: http://goo.gl/9qKhV
This NPS investment should be employer's contribution. Like EPF which has employer and employee contribution, NPS too can have similar investment.
Employer contribution is not counted as taxable income for employee and thus there is no question of income tax on it.
If you employer is ready to create such salary structure and contribute in NPS in your account, you can get benefit from it.
Dear Sir,
Is it necessary that employer & employee should contribute the same amount? what will be the procedure for employer to contribute to employees nps account? Is the exmption allowed for the year 2011-12? Please revert.
@Kailas
Employer would need to sign up with a POP (point of presence) bank/post office etc to start depositing employer contribution to employee's NPS account.
Employer's contribution won't be considered as employee's income and hence there is no income tax on it.
Sir, I am a hp state govt employee. My contribution towards NPS is Rs 25000/- and +Rs 25000/-contributed by my employer.It becomes to Rs 50000/-of both share . My I take rebate on rs 50000/- in income tax return 2011-12. Your kind reply will help me.
@Avtar
You can only claim tax deduction for your contribution(Rs 25000) in NPS in income tax return.
Employer contribution won't be added to your income and anyways there is no tax applicable on that.
I am a PSU employee, I want to know that after 60 years how I can get the pension ? and how amount will be calculated ?
@K K Gupta
At exit after 60 years, you would be required to invest minimum 40 percent of your accumulated savings (pension wealth) to purchase a life annuity from any IRDA-regulated life insurance company. You may choose to purchase an annuity for an amount greater than 40 percent. The remaining pension wealth can either be withdrawn in a lump sum on attaining the age of 60 or in a phased manner, between age 60 and 70, at the option of the subscriber.
Annuity Service Provider would be responsible for delivering a regular monthly pension to you after your exit from the NPS.
The pension amount would depend on how much savings have been accumulated in NPS account. This would depend on equity, debt and bond ratio, market performance and portfolio managers.
I am a private sector employee and PF is deducted from my salary,
Should I be eligible for NPS?
As in above few statements even state govt. employees are contributing in NPS, whereas as per my knowledge its for unorganized sector and whose PF are not deducted.
Kindly clarify
Thanks
Pranay
@Pranay
You can get your NPS account opened even if you are contributing in EPF.
NPS is replacement for EPF for new Govt employees. But for others EPF is still continuing and they can also opt for NPS.
Thanks Pankaj for prompt reply
If this year before end of march 12, I deposit in NPS, should I get benefit of 1000/- from government.
And how long I have to deposited in NPS, and what is minimum and maximum amount.
At what interest rate they return money after 60 years.
Most important, what's your advice regarding this, should one have to go for it or not.
Thanks & regards
Pranay
@Pranay
Government will contribute Rs. 1000 to each NPS account opened in the year 2009-10 and 2010-11 only. So if you open account now, you won't be eligible for this benefit.
You would need to deposit minimum Rs 6000 per year till 60 years of age. There is no maximum amount which can be invested.
There are no fixed return in NPS. Returns would be based on portfolio you choose and marker performance. You may choose fund manager and ratio of investment in equity, debt and government bonds.
One should definitely go for NPS account for retirement perspective. From next year, when Direct tax code comes into play, there would be few tax saving products and NPS would be one of them.
Hi Pankaj,
Thanks for sharing info. for people who don't know about NPS. Good initiative :-)
Please let me know, who to get the online password again, as I lost password for online account.
Thanks in advance....!!!!
@Kedar
You can try forgot password page: https://cra-nsdl.com/CRA/forgotPassword.do
sir,
i used to work in powergrid corporation of india limited (central government) from 26.09.2006 to 20.02.2009. the company had its own EPF trust. my epf account number alloted was e/dl/12882/85159. i have been working in madhya pradesh power generating company limited (state government) since02.03.2009.my present company has registered me recently with NPS but till now no PRAN has been allolted. I wish to withdraw my EPF amount from POWERGRID. how could i withdraw it? please guide
@Nishant
You would need to submit EPF withdrawal forms to Power Grid corporation. Please contact them for procedure.
Thank you Sir for your such a great help.
i want to check my balance.how is it possible to check it wid PRAN number.which site?
@Pramod
You can check NPS balance on this website: https://cra-nsdl.com/CRA/
You would need login for same, which you may have got after opening NPS account.
Hi there,
Well, I'm a 40 yr old individual, currently pursuing a course, thus not employed. I had been employed earlier outside India and not a tax payer as my income were not taxable.
I may not be working in future , thus my regular income source may be one or other pension plans that I will be investing on , thus could you please advise me on the below mentioned points
a) If I'm to invest rs 30000 PA on the post office pension schemes for the coming 20 years, how would I get the returns?
b) Will it be a monthly payment from the department or a lump sum payment of the capital with the interest?
c) given the above scenario's What would be a better regular income payment plans for someone at my age
Regards
Sreekanth
@Sreekanth
New pension scheme (or National Pension system) does not guarantee a fixed return, but returns are dependent on performance of investment.
One may pick equity, debt or corporate bonds in required ratio for investment.
After 60 years, one may get some part back as lump-sum and rest has to be used for buying an annuity plan. This annuity plan would pay you monthly pension.
New pension scheme would be good plan for your needs.
Thankyou very much
My maid is 60 years old, independent, has no hopes from her sons. Is there any pension scheme at her age, she can pay upto 700 per month?
@Mana
We don't have much idea about senior citizen pension plans.
Also read this page about National Old Age Pension Scheme: http://www.oldagesolutions.org/Facilities/Noaps.aspx
i m a bank of maharashtra employee nd today i hv filled the form
the deduction is 10% of my basic + DA is it necessary
nd out of portfolio options i cant choose i have to leave it vacant
@Manveer
If you have opened NPS account yourself and not through employer, then there is no need of 10% deduction mandatorily.
But if employer is also contributing 10% of basic+DA, then you would also have to get same deducted minimum.