The
National Pension Scheme is a contribution based pension scheme. It is regulated
by the Pension Fund Regulatory & Development Authority of India (PFRDA).
The motive of the scheme is to encourage people to invest for their own
retirement in a pension scheme. The scheme is open for anyone between 18 to 65
years of age. It is also open to non-residents.
Under
this pension scheme, subscribers can contribute any amount to build their
corpus. The subscriber can invest this money in different asset classes, such
as equities, corporate bonds, government securities and alternate investment
classes. The subscriber can choose the ‘Active’ option and actively switch
between these classes year on year. If the subscriber does not choose, his
profile goes on ‘Auto’ mode, where the portfolio is balanced depending on the
age of the subscriber. The subscriber can change between different schemes
at any point of time without any capital gain implications.
It
is possible to withdraw from this scheme on retirement. Up to 60% of the corpus
can be withdrawn on retirement. The balance has to be used to purchase an
annuity plan which will provide regular monthly pension to the subscriber.
Retirement is defined as 60 years for the purpose of the scheme. The balance
corpus can be withdrawn tax free.
Investment
in NPS gets a deduction under Section 80CCD of the Income Tax Act. Self
employed people get a deduction of up to 20% of their gross income, and
salaried employees get a deduction of 10% of their gross salary income subject
to Rs. 1.5 lakhs overall deduction. Apart from this, voluntary contributions to
NPS get a deduction of Rs. 50,000 over and above the deduction limit of Rs. 1.5
lakhs.
The
NPS account can be opened both online and offline. It is possible to open this
account online by visiting the NPS website and filling up the form. But for
people who are not comfortable with online procedures, the NPS scheme allows
for offline filling as well.
How
to open NPS
account offline:
An
account can be opened in offline mode by visiting the Point of Presence Service
Provider (POP-SP) you want to open your account with. These service
providers are appointed by the PFRDA who manages the NPS.
A
list of POP-SP depending on your location can be found out from this website:
To
open an account, a Permanent Retirement Account Number (PRAN) form is to be
filled up. This form can be downloaded from the NSDL website or taken from Service
Provider. The subscriber has to:
Fill all the mandatory details in the form
Affix a photograph
Select scheme preference
Submit KYC documentation for proof of identity and proof of
address
Submit first contribution (minimum Rs. 500) for opening the
PRAN account.
The
form and documentation has to be submitted to the service provider. Once the
service provider processes the application, the NPS account will be opened.
The
NPS account is managed through the PRAN or Permanent Retirement Account Number.
When the NPS account is opened offline, the PRAN kit is also sent physically to
the subscriber. The PRAN card will be sent to the subscriber by either post or
courier.
The
PRAN application can be tracked using a receipt number. The link for it is: https://cra-nsdl.com/CRA/pranCardStatusInput.do
