National Pension Scheme (NPS): Why this low-cost scheme is important for everyone

National Pension Scheme (NPS) is considered to be the world's lowest cost pension scheme according to the information on the Pension Fund Regulatory and Development Authority (PFRDA) website. The administrative charges and fund management fees are also lowest for the NPS scheme.

The procedure to apply for the NPS scheme is also simple. An applicant can open an account with any one of the POPs or through eNPS and get a Permanent Retirement Account Number (PRAN).

POPs are the first points of interaction of the NPS subscriber with the NPS architecture. The authorised branches of a POP, called Point of Presence Service Providers (POP-SPs), will act as collection points and extend a number of customer services to NPS subscribers including requests for withdrawal from NPS.

Benefits of NPS

-- NPS scheme is flexible and offers applicants to choose his/her own investment option and Pension Fund or select Auto choice to get better returns.

-- NPS is portable which means an applicant can operate an account from anywhere in the country and can pay contributions through any of the POP-SPs irrespective of the POP-SP branch with whom the applicant is registered, even if he/she changes his/her city, job etc and also makes a contribution through eNPS. The account can be shifted to any other sector like Government Sector, Corporate Model in case the subscriber gets other employment.

-- Oversight by the NPS Trust makes the scheme well regulated with transparent investment norms, regular monitoring and performance review of funds.

-- NPS also offers tax benefits to employees. Individuals who are employed and contributing to NPS would enjoy tax benefits on their own contributions as well as their employer’s contribution as under: -

(a) Employee’s own contribution  - Eligible for tax deduction up to 10% of Salary (Basic + DA) under Section 80 CCD(1) within the overall ceiling of Rs. 1.50 lacs under Sec 80 CCE.

(b) Employer’s contribution   – The employee is eligible for tax deduction up to 10% of Salary (Basic + DA) contributed by the employer under Sec 80 CCD(2) over and above the limit of Rs 1.50 lakhs provided under Section 80 CCE.

-- There are also tax benefits for self-employed: Eligible for tax deduction up to 10 % of gross income under Sec 80 CCD (1) within the overall ceiling of Rs. 1.50 lacs under Sec 80 CCE.

Subscriber is allowed a deduction in addition to the deduction allowed under Section 80CCD(1) for  additional contribution in his NPS account  subject to a maximum investment  of  Rs 50,000 under Section 80CCD 1(B)

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Tax benefits would be applicable as per the Income Tax Act, 1961 as amended from time to time.