NPS

NPS is a government-sponsored pension scheme aimed at providing financial security to Indian citizens after retirement. It allows individuals to invest in a mix of equity, government bonds, and corporate securities to build a retirement corpus.

• All Indian citizens (both residents and non-residents) between the ages of 18 and 70 are eligible to invest in NPS.
• Corporate Employees can also participate under the Corporate NPS scheme, where employers may contribute to the employee's NPS account.

NPS allows individuals to contribute towards their pension during their working years. The contributions are pooled into an NPS account, and the money is invested in a mix of equity, corporate bonds, and government securities. At retirement, the corpus accumulated can be withdrawn as a lump sum or used to purchase an annuity for a regular pension.

The coverage depends on various factors, such as:

• Tier I Account: This is the primary account meant for retirement. Contributions are mandatory, and partial withdrawals are allowed under specific circumstances.
• Tier II Account: This is a voluntary savings account, which can be opened only if you have a Tier I account. The funds in this account are more liquid, and you can withdraw them anytime. Contributions are not tax-deductible.

You can open an NPS account through:

• Online: Through the NSDL eNPS portal (for both individuals and corporates).
• OFline: By visiting a Point of Presence (PoP) such as a bank or financial institution authorized by PFRDA.
• Using Aadhaar: You can also use Aadhaar-based eKYC for online registration.

NPS oTers a variety of asset classes for investment:

• Equity (E): Investment in stocks. High returns, high risk.
• Corporate Bonds (C): Investment in corporate debt instruments.
• Government Bonds (G): Low-risk investment in government securities.
• Alternative Investment Funds (A): For investments in alternative assets, applicable only for certain high-risk, high-return strategies.

You can choose your asset allocation depending on your risk tolerance and investment horizon. You can also opt for Auto Choice, where the allocation is automatically adjusted based on your age.

Yes, most insurance policies allow modifications such as:

• Minimum contribution:
• For Tier I: Rs. 500 per contribution and a minimum of Rs. 1,000 annually.
• For Tier II: Rs. 250 per contribution
• Maximum contribution: There is no maximum limit for voluntary contributions. However, there is a cap of Rs. 2 lakh for claiming tax benefits under Section 80C for contributions made to Tier I.

• Under Section 80C: Contributions up to Rs. 1.5 lakh in a financial year are eligible for tax deductions.
• Under Section 80CCD(1B): An additional tax deduction of up to Rs. 50,000 is available over and above the Rs. 1.5 lakh limit under Section 80C.
• Tax-free returns: The returns earned from NPS are tax-free.
• Tax-free withdrawals: Upon maturity, 60% of the corpus can be withdrawn tax-free, while 40% must be used to purchase an annuity.

Your NPS account is portable. If you change your job, your NPS account can be transferred to the new employer or remain active without any issues. You can also contribute independently to your NPS account if you switch to self-employment.

Yes, NPS allows partial withdrawals under certain conditions:

• After 3 years of contributions, you can withdraw up to 25% of your contributions for specific reasons like children's education, marriage, buying a house, or medical emergencies.
• A complete withdrawal is allowed in case of death or permanent disability.

At the time of retirement (or when you reach the age of 60), you can:

• Withdraw up to 60% of your accumulated corpus as a lump sum, which is tax-free.
• Use the remaining 40% of the corpus to purchase an annuity, which provides a regular pension.
• If you choose to continue working beyond 60 years, you can defer the purchase of the annuity, but your account will continue to earn returns.

An annuity is a product oTered by insurance companies that provides you with regular payments after retirement. At the time of withdrawal, you can use your NPS corpus (the 40% portion) to buy an annuity from an empanelled annuity provider.

Yes, NPS allows you to change your asset allocation once a year. You can switch between equity, corporate bonds, government bonds, and alternative investments based on your risk tolerance and financial goals.

NPS can be a good option if you are looking to save for retirement because:

• It provides a disciplined approach to saving.
• It oTers tax benefits, and the returns can be higher than traditional pension schemes.
• It is low-cost and flexible.

However, the performance depends on your chosen asset allocation and market conditions, especially if you choose the equity or alternative investment options.

Yes, NRIs can also open and contribute to NPS. They need to do so through an authorized Point of Presence (PoP) or online via the eNPS portal. However, the contribution limits and tax benefits might vary slightly.

The minimum age for starting an NPS account is 18 years. You can continue contributing till the age of 70 years, after which you must start receiving your pension.

Yes, you can withdraw from your NPS account before the age of 60, but you must meet certain conditions such as:

• Premature exit: If you exit the system before turning 60, you must use at least 80% of the accumulated corpus to buy an annuity, and the remaining 20% can be withdrawn as a lump sum.
• Premature exit is permitted after 10 years of contributions, subject to specific guidelines.

PPF is a fixed-income, long-term investment with a 15-year lock-in period. It oTers tax benefits under Section 80C and is government-backed.

NPS is designed for retirement and allows higher equity exposure, which can generate better long-term returns, but comes with higher risk. It also oTers additional tax benefits under Section 80CCD(1B).

NPS accounts that remain inactive for a long period may be frozen by the National Pension System Trust. You will need to reactivate the account by resuming contributions.

The PFRDA is the regulatory body for NPS. It oversees the functioning of the NPS system, sets rules and guidelines, and ensures the protection of investors' interests.