What is NPS?
NPS stands for New Pension Scheme. It is a pension scheme introduced by Govt. of India where, You can regularly invest in this scheme and Get a part in lump-sum at your retirement and it gives fixed monthly income for the lifetime. Common mans gateway to getting pension benefits post retirement.
How does it work? The NPS is based on a unique individual Permanent Retirement Account Number (PRAN) created for individual subscribers. The PRAN Number will remain the same for your lifetime irrespective of where you operate your NPS A/c from across the nation.
This system will initially be based on two types of sub accounts created for individual investors:
Tier 1: non with draw able & tax deferred pension account ( for all individuals) and Tier 2: with draw able savings account with no tax advantages (for all individuals subject to minimum deposits per year in Tier-1 A/c).
In this system,
What are the exclusive NPS Benefits?
If the vesting age is less than 60 years, then 20% of the amount accumulated can be withdrawn and the balance 80% will have to be used to purchase annuity.
If the vesting age is 60 years or more but less than 70 years, then 60% of the amount can be withdrawn either as lump sum or in a phased manner between age 60 & 70. Balance 40% will have to be used to purchase annuity.
In case of death due to any cause, the nominee will have the option to withdraw the proceeds in lump sum.
- Tier I:
i. Minimum contribution: Rs.6000 in a year ii. Minimum contribution: Rs.500 per contribution
- Tier II:
- Minimum contribution of Rs.1000 at the time of account opening - Minimum balance of Rs.2000 at the end of a financial year
New Account Opening Charges (Both Tier I & Tier II): Rs.100 Subsequent Contribution / Modification: 0.25% of the amount subscribed by the subscriber, subject to minimum of Rs.20/-
For Tier II Account, along with above documents, bank details & cancelled cheque is mandatory. NRI should have account with bank based in India to open account under NPS.
After the account is opened, the Central Record Keeping Agency (CRA) shall mail a welcome kit containing subscribers Permanent Retirement Account Number (PRAN) card and the complete information provided by the subscriber in the Subscriber Registration Form.