National Pension Scheme -2019
National Pension Scheme -2019
The National Pension Scheme (NPS) is a government-initiated social security scheme. While the NPS scheme was earlier restricted only to Central Government employees, the Pension Fund Regulatory and Development Authority (PFRDA) has opened it up to all Indian citizens to participate in it voluntarily.
Like most pension schemes, a person invests in the pension account at regular intervals during the employment tenure. On retirement, the person can take a certain percentage of the corpus. The balance amount is given as monthly pension afterwards. This government-sponsored scheme is an attractive option for those seeking regular pension post-retirement. The NPS is portable across locations and jobs. It offers many tax benefits under Section 80C and Section 80CCD.
New NPS rules allow subscribers freedom of choice to select Pension Fund Managers (PFM). Subscribers can choose from the current set of public sector pension funds and change once a year. Choice of investment can be equity, debt or combination of both.
Till recently, 20% of the NPS corpus is taxed on maturity. The tax exemption limit for lump sum withdrawal on NPS exit has been increased to 60%. So in effect, withdrawal from NPS is proposed to be made completely tax free. This will be applicable to private subscribers and government employees. This makes NPS as attractive as PPF and EPF.
The government’s contribution towards Central Government employees NPS has been increased from 10% to 14%. The employees continue to contribute 10%. Government contribution under Tier-II of NPS can also be covered under Section 80C deduction up to Rs.150000 for government employees. This would translate to larger pension payouts after retirement to central government employees.
The income tax benefits of Section 80C deduction of up to Rs.150000 with a lock-in period of 3 years will now be extended to all private subscribers; not just government employees. This makes NPS comparable to other Equity Linked Savings Schemes (ELSS).
Exiting National Old Age Pension
The following conditions are the possible reasons for exiting from NPS:
Death of subscriber: The complete accumulated pension corpus is paid to the nominee or legal heir of the subscriber.
Upon superannuation: On reaching 60 years, the subscriber has to utilize at least 40% of the pension corpus to purchase an annuity that provides for a monthly pension. The balance amount can be withdrawn by the subscriber. In cases where the total pension corpus is less than or equal to Rs.200000, the entire money can be withdrawn.
Premature exit: If a subscriber wants to exit the NPS before the age of 60, at least 80% of the corpus must be utilized to purchase an annuity to provide monthly pensions. The remaining corpus can be withdrawn – provided the subscriber has completed 10 years in the NPS. If the total corpus is less than 1 lakh, the subscriber can withdraw the entire amount.
On completion of 60 years;
- A subscriber can choose to continue investing in NPS after 60 years for a period of 10 years. The subscriber can continue to avail tax benefits.
- The subscriber can choose to start receiving a pension after requesting exit from NPS.
A subscriber can choose to defer withdrawal and/or annuity till reaching 70 years.
Partial NPS withdrawal
Earlier, the gap between partial withdrawals was 5 years. But effective August 10 2017, this is not mandatory. The partial withdrawal was possible after staying locked in for 20 years – now it has been reduced to 3 years.
Partial NPS withdrawals can be made for the following:
- Higher education or marriage of children
- Building or buying a house
- Serious diseases like cancer, myocardial infarction, multiple sclerosis or kidney failure
- Major organ transplant, heart valve surgery, graft surgery
- Total blindness, paralysis, coma, stroke
- Serious accident
Online Withdrawal from NPS
- Log in to the NPS account
- Online withdrawal request has to be verified and authorized by the associated POP.
- POP then initiates online withdrawal request on behalf of the subscriber.
The following documents have to be submitted along with the withdrawal form:
- Original PRAN card (Permanent Retirement Account Number)
- KYC documents for photo-ID and address proof
- Bank details
Advance stamped receipt with revenue stamp and cross-signed
Offline Withdrawal from NPS
Exit from NPS before maturity: Download form for premature exit from NPS
Partial withdrawal of NPS contribution: Download form for NPS partial withdrawal
Withdrawal on the maturity of NSPS: Download form for NPS partial withdrawal
The appropriate form must be downloaded, printed and filled out. It has to be submitted to the NPS Point of Presence (PoP). The details required in the withdrawal form are:
- Subscriber Name
- Date of Birth
- PAN number
- PRAN number
- Nominee details
- Bank account details like account number, IFSC code, bank name and branch.
Annuity Service Providers
Annuity Service Providers (ASPs) are the organizations that provide monthly pension to NPS subscribers on exit. They are regulated by the Insurance Regulatory and Development Authority (IRDA). Presently, 5 ASPs have been appointed by the Government for NPS:
- Life Insurance Corporation of India
- HDFC Life Insurance Corporation Ltd
- ICICI Prudential Life Insurance Company Ltd
- SBI Life Insurance Company Ltd
- Star Union Dai-ichi Life Insurance Company Ltd
Types of Annuity
- Annuity paid for life
- Annuity paid for life and then on death of subscriber to the spouse
- Annuity paid for life and then on death of subscriber, the purchase price is returned
- Annuity is paid for life to the subscriber and spouse and then the purchase price is returned to nominee.
NPS Grievance Procedure
- A subscriber can contact the Central Recording Agency (CRA) on their toll-free number 1800 222 080 for any grievance. The T-Pin will need to be validated.
- A subscriber can send a grievance form to the CRA. A grievance form can be submitted to the Point of Presence (PoP) who will then forward it to the CRA.
Subscribers can log on to www.npscra.nsdl.co.in and register their grievance. The I-Pin will need to be validated. They will need to quote the PRAN.