National Pension Scheme: All You Need to Know

It is quite common for a person to plan for future savings in advance. This planning helps when you are not working and allows you to have sufficient funds to keep moving ahead. While some people plan to invest in the SIP to enjoy the power of compounding, there are others who go for fixed deposits.

But there is one option that is specifically designed for future savings. It is government-backed and ensures that you enjoy peace of mind and safety while you are working. This is the National Pension Scheme.

So, if you are also wondering what it is and the benefits it offers, read this guide. Explore all the details you need and enjoy higher returns by making an informed decision.  

What is the National Pension Scheme (NPS)?

The National Pension Scheme (NPS) is a retirement savings plan. It is designed by the government. The scheme is a voluntary and long-term retirement savings plan. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It allows individuals to invest properly when they are working, and this helps to build a good corpus for retirement.

When the investor contributes to the National Pension Scheme, the fund gets invested in a couple of assets. It includes government securities, equity, and corporate bonds. This helps to gain sustainable growth while ensuring there is safety for the funds invested. 

There are two types of accounts where the investor can put the money. These include:

• Tier I Account

A mandatory account meant for retirement savings with withdrawal restrictions.

• Tier II Account

A voluntary savings account that provides liquidity and flexible withdrawals.

By offering these choices and a mix, the NPS scheme ensures that you gain the benefits of the market growth and the security of the safe funds, which offers you peace of mind.

National Pension Scheme Details

NPS is a great scheme if you want a secure future. It allows you to have good funds in your golden period. But is that it? Are there other NPS details to know? Well, yes, these include the following:

National Pension Scheme (NPS) Returns

When it comes to the National Pension Scheme returns, you need to first understand the average returns that are offered by various assets it invests in. So, if you consider that, here are the average returns details:

• Equity has offered an average return of 13-18% PA.

• Government securities offer an average return of 9-11% PA.

• Corporate bonds fall in the range of 8-10% PA.

• Some of the alternative funds involved offer 12-16% PA.

Considering all this, it can be estimated that the NPS average return is around 13% per annum. Now, if you are wondering why this is not fixed like deposits or savings accounts, the answer lies in its market-linked structure. Since the contributions are invested in a mix of equity, debt, and alternative funds, the performance depends on market fluctuations.

Though this might look a bit challenging to a few investors, still, if you consider this, the investment is safer compared to direct trading in the stock market. Also, by opting for this option, you not only secure your future but also are in a position to gain better returns over time. 

National Pension Scheme (NPS) Tax Benefit

One of the biggest concerns is that we invest in the taxation part. So, when you are investing in the NPS, this is the same question that you would need to answer. So, here are the taxation parts that you must know:

• Section 80C Deduction

All the contributions to NPS are valid for deductions of up to Rs. 1.5 lakh in a financial year, which is actually the overall limit of the section.

• Section 80CCD(1B) Deduction

An additional exclusive deduction of Rs. 50,000 is available for NPS contributions, over and above Section 80C. This helps you to get the extended deduction of up-to Rs. 2 lakh.

• Employer’s Contribution (Section 80CCD(2)

If your employer contributes to your NPS account (up to 10% of basic salary plus DA for private sector employees, or 14% for central government employees), it is deductible from taxable income without any monetary cap.

• Tax on Withdrawal

At retirement, 60% of the corpus withdrawn as a lump sum is tax-free, while the remaining 40% used to purchase an annuity is also exempt at the time of purchase (though annuity income is taxable as per the applicable slab).

These provisions make NPS one of the most tax-efficient investment options as compared to the rest of the choices available in the market, focusing on the future corpus building.

How to Open an NPS Account?

You can open an NPS account online in just a few steps:

Step 1: Visit the official NPS portal.

Step 2: Select the option to register and link your PAN, Aadhaar, and mobile number.

Step 3: Verify your details through the OTP sent to your registered mobile number.

Step 4: Create your account and receive a Permanent Retirement Account Number (PRAN).

Step 5: Use your PRAN for all future logins and account management.

National Pension Scheme Login

You can log in to your NPS account through:

• NSDL Protean Portal

• KFintech Portal

Use your PRAN (User ID) and password created during registration to access the account.

NPS Customer Care Numbers

• Call Centre Number: 1800 110 708

• SMS Service: Send “NPS” to 56677

• Toll-Free (Registered Subscribers with PRAN): 1800 222 080

Conclusion

The National Pension Scheme (NPS) is a practical and secure way to prepare for retirement. This helps you to gain the benefit of better portfolio management while you ensure you gain higher returns in the process as well. 

Focused on investing in equity and debt, the NPS offers you the benefit of growth and security at the same time. Also, this is perfect for both salaried and self-employed individuals. Starting early is the key to building better wealth for your future.

So, are you ready to take the next step? Start your investment planning with Rupeezy. Use the efficient tools, guides, and support to ensure you take the right investment call in no time. 

FAQs 

1. Can I transfer my NPS account if I change jobs or cities?

Yes. The NPS account can be transferred when you change jobs or cities. All you need is your PRAN number, and the account can be linked again.

2. What is the maximum age to join NPS?

The maximum age to join the NPS is 70 years.

3. How much pension will I receive from NPS?

There is no fixed amount that you will receive. It is based on your savings, contributions, and the market conditions. 

4. Can I nominate someone for my NPS account?

Yes. When you open the account, you get the option to nominate. Also, you can nominate someone in the later years as well. 

5. Is NPS suitable for short-term goals?

No, NPS is a long-term investment designed for retirement planning. This is not a good choice if you are looking for a short-term choice of investment.