The National Pension System (NPS) offers an attractive way to build a secure retirement corpus with affordable contributions. For the NPS Tier 1 account, contribute a minimum of ₹500 each time and ₹1,000 annually. Tier 2 has an initial contribution of ₹1,000 with no minimum per contribution.
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†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
The National Pension Scheme (NPS) contributions refer to the funds individuals invest in their NPS accounts to build a retirement corpus. The NPS is a voluntary, long-term retirement savings scheme designed by the Government of India to provide financial security during old age. Contributors, often employees from the public and private sectors, make regular contributions to their NPS accounts throughout their working years. These contributions are invested in a mix of equity, fixed deposits, liquid funds, and government funds, aiming to generate optimal returns.
The NPS offers two types of accounts: Tier I, which is a mandatory, non-withdrawable account meant for savings, and Tier II, which is a voluntary, withdrawable account that provides flexibility in terms of deposits and withdrawals. Upon reaching retirement age, you will be given the choice to take out a lump sum of up to 60% of your accumulated funds. The remaining portion can be utilized to acquire annuities, which, in turn, will provide you with a regular retirement pension. Minimum investment in NPS not only helps individuals accumulate wealth over time but also offers tax benefits under Section 80C and 80CCD of the Income Tax Act, making it an attractive retirement planning option for many.
You can use the NPS Calculator online to check your potential returns on your investments.
The National Pension Scheme comprises two tiers—Tier 1 and Tier 2. Tier 1, a primary retirement account, mandates long-term savings with withdrawal restrictions, aiming to build a significant corpus offering tax benefits. In contrast, Tier 2 is a voluntary savings account with greater withdrawal flexibility, allowing contributors to meet immediate financial needs.
For the NPS Tier 1 account, a minimum investment of ₹500 is required at the time of opening. The minimum NPS contribution to keep the account active is an annual contribution of at least ₹1,000 is necessary. Contributions are locked until age 60, with the added benefit of tax deductions up to ₹2,00,000 annually.
To open an NPS Tier 2 account, it's mandatory to have a Tier 1 account. The NPS Minimum Contribution for Tier 2 is ₹1,000, and you must make at least one annual contribution to keep the account active. Unlike Tier 1, Tier 2 has no lock-in period and operates like a standard savings account. However, it doesn't offer tax benefits.
You can make NPS contributions in Tier 1 and Tier 2 accounts offline by visiting your nearest PoP-SP. These Points of Presence serve as a link between NPS subscribers and the system. Submit an NPS Contribution Instruction Slip along with necessary documents and the contribution amount in cash, cheque, or DD. PoPs facilitate physical NPS contributions, ensuring a straightforward process for subscribers.
NPS contributions in Tier 1 and Tier 2 accounts can be made through the nearest Nodal Office. As a subscriber, submit required forms and documents to contribute to Tier 1 or Tier 2 accounts. The Nodal Office validates details and uploads contributions to the NSDL CRA portal.
NPS contributions in Tier 1 and Tier 2 accounts can be made online via mobile apps like NSDL e-Gov and KFintech CRA. Download the app, log in with PRAN details, and follow instructions for seamless contributions. Available for both Android and iOS users.
Minimum NPS contributions are facilitated through Central Record Keeping Agencies (CRAs), appointed by the PFRDA online. Utilize CRA portals to contribute to both Tier I and Tier II accounts. Choose a CRA, create an account, receive your PRAN details, and start investing in NPS with ease.
You can make your minimum investment in NPS online through the eNPS portal by visiting the ePNS portal. If NSDL is your CRA, log in using your PRAN and password. Provide additional details such as date of birth and captcha, then choose the account type, contribution amount, and make declarations before payment. Your contribution details will be reflected in your NPS account.
| Category | Tier 1 | Tier 2 |
| NPS Minimum Initial Contribution | ₹500 | ₹1,000 |
| NPS Minimum Per Contribution | ₹500 | ₹250 |
| NPS Minimum Per Financial Year | ₹1,000 | None |
| Maximum Contribution Limit | No fixed limit | No fixed limit |
Under NPS rules, government employees receive automatic employer contributions, while private companies have the option. Companies offering NPS contributions can claim tax benefits under Section 36 (i) (IV) of the Income Tax Act, 1961, reducing their income tax burden.
Employees can contribute to their NPS accounts, securing retirement income with tax benefits. Salaried and self-employed individuals enjoy deductions of up to ₹2,00,000 per annum for NPS Tier I contributions, making it the best investment option for financial planning.
| Section of Income Tax for NPS Deduction | Description |
| 80CCD (1) | Tax deductions up to 10% of salary (basic + dearness allowance), up to ₹1.5 lakhs annually. |
| 80CCD (2) | Employer NPS contributions, up to 10% (14% for government employees) of salary (basic + dearness allowance), qualify for deductions under this section. |
| 80CCD (1B) | Self-contribution of up to ₹50,000 is eligible for NPS tax deduction. |
Employee Contributions to the NPS Tier II account are not eligible for tax benefits.
For central government employees, excluding the armed forces, NPS is compulsory. The government contributes 14% of the employee's salary (basic + DA) to their NPS accounts. Employees are required to make a minimum investment in NPS of 10% of their salary (basic + DA) to their NPS accounts. State governments also commonly contribute to NPS for their employees.
Non-resident Indians (NRIs) aged 18 and above can contribute to NPS through their NRE/NRO bank accounts. The minimum contribution in NPS for NRIs is ₹500 to the Tier I account, with an annual requirement of ₹6,000. NRIs enjoy tax benefits on maturity, including a tax-free corpus, tax-free premature withdrawal (if the corpus is < ₹1,00,000), and tax-free corpus transfer to the nominee in case of premature death. However, Persons of Indian Origin (PIOs), Overseas Citizens of India (OCIs), and Overseas Corporate Bodies (OCBs) are not eligible to contribute to NPS.
POPs (Points of Presence), appointed by PFRDA, are NPS service providers. They handle tasks like opening NPS accounts, managing contributions, and account changes. Their branches, known as PoP Service Providers (PoP SP), extend these services nationwide.
| Intermediary | Charge Type | Service Charges (excluding taxes) | |||
| POP | Private | Govt. | |||
| Initial registration | Min ₹200 and Max ₹400 | NA | |||
| All subsequent transactions | 0.25% of the contribution, subject to a minimum of ₹20 and a maximum of ₹25,000; For non-financial ₹30 | NA | |||
| Persistency 6 months Rs 1000 contribution | Contribution between ₹1,000 to ₹2,999: Rs 50 per annum Contribution between ₹3,000 to ₹6,000: ₹75 per annum Contribution above Rs 6,000 ₹100 per annum |
NA | |||
| Contribution through eNPS | 0.20% of the contribution, subject to a minimum of ₹15 and a maximum of ₹10,000 | NA | |||
| Processing of Exit / Withdrawal | 0.125% of the corpus, subject to a minimum of ₹125 and a maximum of ₹500 | NA | |||
The Central Recordkeeping Agency (CRA) is the NPS service provider appointed by the PFRDA. CRAs, including Computer Age Management Services Ltd (CCRA), KFin Technologies Limited (KCRA), and Protean eGov Technologies Ltd (formerly NSDL e-Governance Infrastructure Limited), maintain records and provide customer service to NPS subscribers.
| Intermediary | Charge Type | Service Charges (excluding taxes) | |||
| Private / Govt. | Lite/APY | ||||
| CRA | PRAN Opening Charges | With a Physical PRAN card | ePRAN card with the physical kit | ePRAN card with email kit | ₹15 |
| NCRA: ₹40 CCRA: ₹40 KCRA:₹39.36 | NCRA: ₹35 CCRA: NA KCRA: ₹39.36 | NCRA: ₹18 CCRA: ₹18 KCRA: ₹4 | |||
| Annual PRA Maintenance cost per account | NCRA: ₹69 CCRA: ₹65 KCRA: ₹57.63 | NCRA: ₹20 CCRA: ₹16.25 KCRA: ₹14.40 | |||
| Charge per transaction | NCRA: ₹3.75 CCRA: ₹3.50 KCRA: ₹3.36 | Free | |||
| Bank account verification charges | KCRA: ₹1.90 CCRA: ₹2.00 NCRA: ₹2.240 | ||||
| Intermediary | Charge Type | Service Charges (excluding taxes) | |||
| PF charges | Investment Management Fees | AUM slabs | IMF FEE | ||
| Upto ₹10,000 Cr. | 0.09% | ||||
| ₹10,001 – ₹50,000 Cr. | 0.06% | ||||
| ₹50,001 – ₹1,50,000 Cr. | 0.05% | ||||
| Above ₹1,50,000 Cr. | 0.03% | ||||
| Intermediary | Charge Type | Service Charges (excluding taxes) | |||
| NPS Trust | Reimbursement of Expenses | 0.005% p.a | |||
In addition to the above-mentioned fees, there are other charges to be aware of:
Custodian-imposed asset servicing fees, set at 0.0032% per annum for both electronic and physical transactions.
Applicable payment gateway service charges.
If your association with a Point of Presence (POP) lasts beyond six months in a financial year, you are obligated to pay a persistence fee.
Government employees have their CRA charges covered by their respective government.
Any pertinent GST or other government taxes are treated as supplementary charges.
Checking your NPS contribution statement is important to track your progress towards your retirement goals. By regularly checking your NPS contribution statement, you can ensure your contributions are accurately recorded and stay on track towards your retirement goals. Here are three ways to access your NPS contribution statement:
Go to the eNPS website: https://enps.nsdl.com/eNPS/NationalPensionSystem.html
Log in using your PRAN (Permanent Retirement Account Number) and IPIN (Investor PIN).
Click on the "Account Statements" tab.
Select the type of statement you want to view (e.g., Annual Consolidated Statement, CAS, Individual Transaction Statement).
Choose the period for which you want to see the statement.
Click on "View Statement" to download or print the statement.
Download the NPS mobile app on your Android or iOS device.
Login using your PRAN and mobile number or biometric authentication.
Tap on the "Account Statements" section.
Select the type of statement and period you want to view.
Download or view the statement online.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance
plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
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