National Pension System (NPS) is a pension scheme introduced by Government of India to provide social security to citizens of India and thus gives an opportunity to invest and accumulate savings. On maturity, the subscriber of the scheme gets a lump sum amount along with regular income for a stress-free retirement. The Pension Fund Regulatory and Development Authority (PFRDA) is established by the Government of India to develop and regulate pension sector in India. The basic aim of NPS is to institute pension reforms and to inculcate the habit of saving for retirement amongst the citizens of India. The subscriber of the NPS scheme will be allotted with a unique Permanent Retirement Account Number (PRAN). The PRAN will remain same for the rest of the subscriber’s life. The subscriber can use this unique PRAN from any location in India.
The subscriber of the NPS scheme will get an access to two personal accounts with a single unique PRAN. Those accounts are:
- Tier I Account: This is a non-withdrawable account where the applicant contributes his/her savings for retirement purpose. The subscriber can claim tax benefits against the contributions made by him/her.
- Tier II Account: This is a voluntary savings facility. The subscriber can withdraw savings from this account whenever he/she wishes to do so. The subscriber cannot claim any kind of tax benefit against the contributions on this account. However, subscribers can only make investments to the Tier I account if he/she has an active Tier II account.
Following are the people who can join and get benefitted with the NPS scheme:
- Central and State Government Employees: NPS is applicable to all Government employees both central and state, except for those employed with the Armed Forces. Any other Government employee who is not mandatorily covered the NPS can also subscribe to NPS under “All Citizen Model” through a Point of Presence-Service Provider.
- Corporate: Under the Corporate model, corporate decide investment choice either at subscriber level or at the corporate level centrally for all its underlying subscribers. The corporate or the subscriber also have an option to choose the pension fund manager and the percentage in which the funds are allocated in various asset classes.
- All Citizen Model: All citizens of India aged between 18 to 60 years as on the date of submission of his/her application to Point of Presence (POP)/ Point of Presence- Service provider (POP-SP) can enroll and contribute to NPS scheme. The subscriber should fulfill the KYC requirements and submit all necessary documents.
NPS account has the following benefits:
- NPS is regulated by PFRDA (Pension Fund Regulatory and Development Authority) with transparent investment norms.
- NPS is transparent and cost effective system wherein the NPS account can be accessed online to make contributions and track investments.
- It is simple for the subscribers to open an NPS account. All the subscriber has to do, is to open an account with his/her nodal office and get a Permanent Retirement Account Number (PRAN).
- Each subscriber has a separate unique PRAN, which is portable. The PRAN will remain same even if the subscriber gets transferred to any other location.
- Investments in the NPS scheme attract tax benefits.
