NPS CONTRIBUTION

NPS CONTRIBUTION – LATEST RULES AND UPDATES

It is a security scheme by the central government. This pension program is open to employees from the private, public and the unorganized sectors. If anybody interested to contribute in Tier I and Tier II account, then one has to deposit the amount with duly filled NPS Contribution Instruction Slip by visiting eNPS website to make NPS contribution.

 Some Points About The Changes In Rules of NPS Contribution

  1. The cabinet made NPS fully tax free on withdrawal. The investor is allowed to withdraw 60% of the corpus on maturity and will get full tax exemption.
  2. On reaching the age of 60 or on retirement, subscribers can withdraw 60% of the fund and the remaining 40% will be invested in annuity plans. Only 20% balance is taxable and remaining is tax-free.
  3. This change on withdrawals about tax will be applied to both government and private users.
  4. For government employees, the contribution of government has been increased to 14% from 10%.
  5. Lakhs of central government employees will get benefit covered under NPS.
  6. Central government employees get more flexibility in choosing patterns of investment and choice of the pension fund.
  7. NPS has two types of services – Tier I and Tier II. Subscriber is free to withdraw from Tier II but can’t withdraw from Tier I till retirement.
  8. Option to stay invested up to age 70.

 

Must Read: TOP 10 PENSION PLANS IN INDIA BEST FOR RETIREMENT LIFE

Types Of Accounts for NPS Contribution

ParticularsNPS Tier-I AccountNPS Tier-Iii Account
StatusDefaultVoluntary
WithdrawalsNot permittedPermitted
Tax Exemption
Up to Rs 2 lakh p.a.(Under 80C and 80CCD)
none
Minimum NPS ContributionRs. 500 or Rs. 1000 p.a.Rs. 250
Maximum NPS ContributionNo limitNo limit

Features And Benefits Of NPS Contribution

Returns/Interest

A part of NPS goes to equities and offers returns that are higher than PPF. This scheme has delivered 8% to 10% annualized returns. In NPS you can also change your fund manager.

Risk assessment

With a 50% cap on equity exposure, it stabilizes the risk of investors. NPS has a higher earning potential than other fixed income schemes.

NPS Withdrawal rules after 60

After retirement, you can’t withdraw the entire fund and this will help you in the future. 40% of the corpus pays you a regular pension.

Early Withdrawal and Exit rules in the National Pension System

It has flexible rules in which you can withdraw up to 25% for certain purposes. These include children’s higher education or wedding, buying/building a house or medical treatment of family/self, among others.

Comparing NPS Scheme With Other Tax Saving Instruments

InvestmentInterestLock-In-PeriodRisk Profile
NPS8% to 10% expectedTill retirementMarket-related risks
ELSS12% to 15% expected3 yearsMarket-related risks
PPF8.1% guaranteed15 yearsRisk-free
FD7% to 9% guaranteed5 yearsRisk-free

Must Read: PROS AND CONS OF NEW PENSION SYSTEM

NPS Contribution By Employer

Under the rules, government sector employees automatically got into their pension account by the government. Hence NPS contribution is common in government employees but less common among private sector employees.

Therefore if you are not a government employee then you can get great returns by investing in NPS. So with the help of the above article, you can know the new rules and the NPS contribution.

Must Read: NATIONAL PENSION SCHEME A NOBLE STEP TO PROVIDE PENSION

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