NPS Eligibility

All citizens of India (resident or nonresident -NRI) are eligible to open NPS account provided they meet following requirements.

AGE- Between 18 to 65 years

KYC- Know Your Customer norms as required to fill the registration form

DOCUMENTS

• Proof of Identity
• Proof of Residence
• Bank Proof

Tier 1 & Tier 2 NPS Accounts

NPS offers a subscriber the option to save for retirement as well as for emergency needs.

These are two NPS accounts Tier I and Tier II. Tier I account is used for retirement savings, Tier II account can be used for savings for emergency needs. Operating guidelines for Tier I and Tier II account are as mentioned below:

Tier I NPS Account

It is mandatory to open Tier I NPS account if you wish to join NPS

Withdrawal from this account is restricted and conditional.

You can open Tier I NPS Account with a contribution as low as Rs.500/-. To keep the Tier I NPS Account active, you need to deposit a minimum of Rs.1,000 each year.

Tier II NPS Account

Tier II NPS Account is optional and can be opened either at the time of Tier I NPS Account opening or later.

You can withdraw from this account anytime.

Tier II NPS Account can be opened with initial minimum contribution of Rs.1,000/-. There is no requirement of depositing any minimum amount each year to keep the Tier II NPS Account active.

Tax Benefit for Self Employed Individuals

Exhausted your 80C limit?

You can invest up to Rs.50,000 and avail tax deductions u/s 80CCD (1B) of Income Tax Act, 1961.

This tax benefit is over & above the tax benefits claimed by you for your investments of up to Rs. 1.5 lakh under 80C.

You have not exhausted your 80C limit yet?

You can invest up to 20% of your Gross Annual Income. This amount to the extent of 1.5 lakh is eligible for tax deduction u/s 80CCD (1) of IT Act, 1961.

Additionally, you can invest up to Rs.50,000 and avail tax deduction u/s 80CCD (1B)

Tax Benefit for Salaried Individuals

Exhausted your 80C limit?

You can invest up to Rs.50,000 and avail tax deductions u/s 80CCD (1B) of Income Tax Act, 1961.

This tax benefit is over & above the tax benefits claimed by you for your investments of up to Rs. 1.5 lakh under 80C

You have not exhausted your 80C limit yet?

You can invest up to 10% of your Salary (Basic + DA). This amount to the extent of 1.5 lakh is eligible for tax deduction u/s 80CCD (1) of IT Act, 1961.

Additionally, you can invest up to Rs.50,000 and avail tax deduction u/s 80CCD (1B)

Additional Tax Benefit for Salaried Individuals under Corporate NPS

Under Corporate NPS scheme, employees get additional tax benefits on investment routed through their employer. Such investment up to 10% of Salary (Basic + Dearness Allowance) to the extent of Rs 7.5 lakh is deductible from taxable income u/s 80CCD (2) of Income Tax Act, 1961.

Tax treatment for NPS at the time of Exit.

For Premature Exit from NPS

NPS subscribers who wish to exit NPS before maturity of the scheme can withdraw 20% of the corpus. The amount withdrawn is exempted from tax.

For lumpsum withdrawal at retirement

Once the NPS subscriber attain the retirement age (60 years), Subscriber is eligible to withdraw 60% of the corpus in lumpsum. The amount withdrawn is exempted from tax.

For Purchasing Annuity

The amount that the subscribers use for purchasing an annuity is fully exempted from tax.

Investment choices

The subscriber can opt to select either Active choice or Auto choice option

ACTIVE CHOICE: Individual Funds

• In this type of investment choice, subscriber has the right to decide as to how his / her contribution is to be invested, based on personal preference.

The subscriber can choose the proportion of their funds that may be invested in each of the investment options. This is called the Active Choice. The only restriction is that the proportion invested in asset class E cannot exceed 75 percent and that in asset class A is restricted to 5 percent. The cap on allocation to equity will start reducing by 2.5% each year from age 50 onwards till it comes down to 50% at age 60 and above. For example, the subscriber may choose an asset allocation of 50 percent in ‘E’, 25 percent in ‘C’ and 25 percent in ‘G’. The asset allocation may be changed in favour of the safer ‘C’ and ‘G’ assets classes as retirement comes closer and the accumulated corpus has to be withdrawn to provide the pension.

Here is a detailed representation of the cap on asset allocation in different asset classes

Withdrawal from Tier I Account at retirement

Subscriber can withdraw from their NPS Tier I account on the date of retirement (for corporate subscribers) or 60 years for (UOS subscribers). Following are the rules for withdrawal:

• Atleast 40% of the fund value (corpus) in NPS Tier I account on the date of retirement must be mandatorily utilised to purchase an annuity. The amount utilised for purchase of annuity is fully exempted from tax.
• The subscribers have an option to defer the purchase of an annuity for a period of three years.
• The Subscribers can withdraw upto 60% of the corpus as lumpsum. The lumpsum withdrawal amount is exempted from tax.
• The subscriber can defer the withdrawal of the lumpsum amount and continue to stay invested in NPS upto 70 years or 10 years from date of retirement whichever is earlier.
• The subscriber is also permitted to withdraw lumpsum in 10 instalments. The annuity must be purchased before opting for phased withdrawal.
• If the corpus in the subscriber’s account is equal to or less than Rupees Two Lakh, subscriber can withdraw the full amount.

Premature exit from Tier I Account

Subscribers can opt to exit from their NPS account before retirement subject to following conditions:

• Premature exit is permitted only after 10 years of participation from the date of opening the account.
• subscribers can withdraw 20% of the corpus in lumpsum, and the remaining 80% must be used to purchase annuity.

Partial Withdrawal from NPS Tier I Account

The subscribers can withdraw a partial amount from NPS account subject to following rules:

• The maximum amount of withdraw cannot exceed 25% of value of subscriber contribution.
• The subscribers are eligible for partial withdrawal only after three years of participation in NPS from the date of opening the account.
• The subscriber is entitled to partial withdrawals to a maximum of three times during the tenure of NPS account.
• Partial withdrawal is permitted for specific purposes. Among these are included
  • Higher education
  • Marriage of children
  • Purchase/construction of residential houses, etc.
  • Medical expense
  • Expense toward establishment of own business venture, etc.

Withdrawal for Tier II Account

For Tier II account holder withdrawals are permitted anytime

Upon the death of the subscriber

In the unfortunate event of the death of the NPS subscriber. The entire outstanding corpus in the subscriber’s account will be paid to the nominee. The corpus received by the nominee is fully exempted from tax.

PoP (Point of Presence) charges

Registration Fees -One Time Fee of ₹ 400

Contribution Processing - It is 0.50% of the contribution subject to a minimum charge of ₹ 30 and the maximum charge is ₹ 25,000.

Non Financial Transaction Processing - It is ₹ 30 on each non-financial transaction done.

Persistency (Applicable for Active Retail Customer with more than 6 months tenure with POP)

• ₹ 50/- per annum for annual contribution ₹ 1000 to ₹ 2999.
• ₹ 75/- per annum for annual contribution ₹ 3000 to ₹ 6000.
• ₹ 100/- per annum for annual contribution above ₹ 6000.

CRA charges - Central Record Keeping Agency

CRA recovers charges by cancelling units from customer’s NPS account on quarterly mode.

PFM (Pension Fund Manager) charges

Effective 1st April 2021, The Fund Management charge for PFMs has been revised. The new charge structure is slab – based according to their AUM slab. Maximum charge permissible against each slab is shown below :

Other Intermediaries Charges

Charges for PFM, Custodian and NPS Trust are recovered on daily basis by adjusting NAV.

Exit & Withdrawal Charges

Processing charge of 0.125% of corpus with minimum of ₹ 125 and maximum of ₹ 500.

Payment Gateway Charges

For processing contribution online, the payment gateway service provider levies charges depending on the payment mode opted by the customer. These charges are levied to customers on each successful transaction.

Offline Contribution

The subscriber can make an offline contribution to their NPS account; We can help to subscription with POP’s (HDFC Pension)

Minimum and Maximum Contribution

Point of Presence (POP)

Points of Presence (POP) are the first points of interaction of the NPS subscriber with the NPS architecture. The authorized branches of a POP, called Point of Presence Service Providers (POP-SPs), acts as collection points and extend a number of customer services to NPS subscribers

Central Recordkeeping Agency (CRA)

The recordkeeping, administration and customer service functions for all subscribers of the NPS are being handled by separate record keeping agency, known as CRA

Pension Fund Manager

The Pension Fund Manager (PFM) appointed by PFRDA manages investment of funds under NPS

Annuity Service Provider (ASP)

Life Insurance companies registered with PFRDA to provider Annuity is called ASP. It is responsible for delivering a regular monthly pension post retirement

Trustee Bank

The Trustee Bank appointed under NPS shall facilitate fund transfers across various entities of the NPS system viz. PFMs, ASPs, NPS Customers etc

Custodian

Custodian holds and protects the underlying assets bought by the PFMs under your policy

NPS Trust

The NPS trust has been set up and constituted for taking care of the assets and funds under the NPS in the interest of the beneficiaries (NPS Customers)

PFRDA

An autonomous body set up by the Government of India to develop and regulate the pension market in India