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Overview

Are you concerned about retirement planning? Do you want to ensure you can get a decent monthly income, enabling you to live a financially secured post-retirement life? If you are, then you should opt for the National Pension Scheme. A retirement planning-cum-tax saving initiative of the Central Government, NPS is a voluntary contributory pension scheme. The scheme is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) to promote old age income security. NPS is a market-linked product that allows you to create your retirement corpus and flexibly choose from various asset classes and invest in annuity plans.

NPS is an easily accessible, low cost, tax-efficient, flexible and portable retirement savings account.

What is National Pension System?

The National Pension System is a pension scheme introduced by the Government of India to help Indian citizens create a retirement corpus. Under this, you can make systematic contributions in a profitable avenue that would provide you market-linked returns and a regular income in your post-retirement life.

Objectives of the National Pension System?

The NPS (National Pension System) is a government-sponsored defined contribution pension plan with the following goals.

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To provide income for the elderly

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Long-term market-based returns to its subscribers

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Saving on taxes while investing

Additional Tax Benefit

Save tax of ₹15,600
Investment up to ₹50,000 year is eligible for tax exemption u/s 80CCD (1B)
+
Save tax of ₹46,800
Investment up to ₹1.5 lahk/year is eligible for tax exemption u/s 80CCD (1)
as an altermate to 80C
EEE savings

Your Investment amount, returns earned & maturity amount are all TAX FREE

Calculator

Current Age

Retirement age

Monthly contribution

% of Wealth to be Invested in Annuity

Rate of interest

18,98,372
6,00,000
12,98,372
1,80,000

24,89,141

37,33,711

24,891

Advantages of the NPS

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Offers flexibility

Subscribers can choose their own investment options and pension fund and see their money grow.

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Convenience

NPS scheme allows for seamless portability between jobs and locations. It would provide a hassle-free arrangement while you transition to a new job/location.

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Regulated and monitored

NPS is regulated by PFRDA, with transparent investment norms and regular monitoring and performance review of fund managers by NPS Trust.

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Best of both worlds

You get the benefits of compounding as well as low management cost structure at 0.03% - 0.09%.

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Online accessibility

Online Subscription & seamless investments in NPS either via SIP or lump sum. View statement of transactions, contribution book, SIP book, unit holding, NAV of schemes of all the fund managers through ICICIdirect.com

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Tax Benefit

You can claim a deduction of up to Rs.150000 under section 80 C of the Income Tax Act. Apart from this, an additional deduction of Rs.50000 is allowed under section 80 CCD (1B) of the Income Tax Act for contributing to the NPS investment.

How NPS Works?

As an NPS account holder, you need to make regular contributions to create your retirement corpus. The sums accumulated are pooled into a pension fund managed by PFRDA fund managers, and invested in diverse equity, government security and corporate bond schemes. The sums invested in the markets grow and accumulate over the years; generating returns based on their market performance and investment durations. The NPS account matures when you retire, typically around 60 years of age. Upon retirement, you may withdraw 60% of your contributions into the account as a lump sum, with no tax implications; whereas 40% of the accumulated retirement wealth is used to purchase from PFRDA empanelled annuity service providers.

How to invest in NPS on ICICIdirect.com ?

  • Login Icon Login to your ICICIdirect.com account
  • Go to Mutual Funds Click on Subscribe now
  • Select an ELSS Fund Enter Personal Details, Nominee Details
  • investment details Choose Scheme Preference & place contribution amount
  • proof of investment Submit Declaration & Authorization
  • proof of investment Upload document & eSign

Charges associated with NPS investment

Charges for investment in NPS & managing funds are very less as compared to other investment products. It is very cost-effective investment option.

Agency Service NSDL - Charges* KARVY - Charges* Mode
CRA-NSDL CRA - KARVY PRA Opening Charges ₹40 ₹39.39 Through Cancellation of Units
Annual Maintenance of units ₹95 ₹57.63
Charges per transaction ₹3.75 ₹3.60
Point of Presence (POP)- ICICI Securities Ltd. Registration (Tier 1 or Integrated Tier 1 & Tier 2) ₹200 Collected Upfront
Initial subscriber contribution/ Regular/Subsequent contribution 0.25% of contribution subject to minimum of ₹ 20 and maximum of ₹25,000
Service Requests as prescribed by PFRDA ₹20
Persistency > 6 months & ₹1000 contribution ₹50/- per annum (only for NPS-All Citizen) Through Cancellation of Units
Custodian Asset Serving (Per Annum) 0.0032% of Assets under Custody Through adjustment in NAV
Pension Fund Investment Management (Per Annum) Slabs of AUM managed by the Pension Fund Maximum Investment Management Fee(IMF)
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%
* UTI Retirement Solutions Ltd Charges a fee of 0.07% under this slab. The IMF to be charge by the Pension Fund on the slab structure would be on the aggregate AUM of the Pension Fund under all schemes managed by Pension Funds.
NPS Trust Reimbursement of Expenses ( Per Annum) 0.005% of Assets Under Management
  • Also, persistency charge would be applicable to NPS-All Citizen Model as per conditions stated in PFRDA circular dated October 31, 2017 (Clarification on Revision of Service Charges to POPs under NPS-All Citizen & Corporate Model).
  • Additional service tax and other charges levied as applicable
  • ICICI Securities & payment gateway service provider do not levy any specific charge to customers for using the payment gateway facility.

Settlement cycle for transactions processed through payment gateway:

  • Contributions received before 8:30 am on business day is settled on the same day i.e. Transaction day (T Day).
  • Contributions received after 8:30 am are settled on the next business day i.e. Transaction +1 working day (T+1 day)

NPS Return

Pension Fund Managers Inception Date Tier I Tier II
Scheme (A) Scheme (C) Scheme (E) Scheme (G) Scheme (A) Scheme (C) Scheme (E) Scheme (G)
SBI Pension Fund Funds Private Limited 07-Jul-2010 11.1200 9.6500 4.6800 10.5600 0.0000 9.2800 4.7300 10.3600
UTI Retirement Solutions Limited 07-Jul-2010 11.1200 9.6500 4.6800 10.5600 0.0000 9.2800 4.7300 10.3600
LIC Pension Fund Ltd 07-Jul-2010 11.1200 9.6500 4.6800 10.5600 0.0000 9.2800 4.7300 10.3600
Kotak Mahindra Pension Fund Limited 07-Jul-2010 11.1200 9.6500 4.6800 10.5600 0.0000 9.2800 4.7300 10.3600
ICICI Prudential Pension Funds Management Company Limited 07-Jul-2010 11.1200 9.6500 4.6800 10.5600 0.0000 9.2800 4.7300 10.3600
HDFC Pension Management Company Limited 29-Oct-2013 11.1200 9.6500 4.6800 10.5600 0.0000 9.2800 4.7300 10.3600
Birla Sun Life Pension Management Limited 30-Nov-2017 11.1200 9.6500 4.6800 10.5600 0.0000 9.2800 4.7300 10.3600

Articles

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Invest in your retirement travel dreams with NPS(National Pension System)

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Better Early than late to Start Saving taxes with NPS!

Paying huge taxes and looking for ways to save some money? Why wait till the end of the year to find tax-saving investment options?

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Retirement is not the end but the beginning of a new tale. Having worked all your life, you deserve a break. With precious time in your h... Read more

Videos

ELSS
ELSS
ELSS
ELSS
ELSS

podcast

ELSS & NPS: Wealth creation with tax savings by Mr. Sachin Jain, Research Analyst – ICICIdirect

Compound your Money with Tax Benefits – Mr. Sachin Jain, Research Analyst, ICICIdirect.

Importance of NPS

Terms & Conditions

The applicant should be between 18 – 65 years of age as on the date of submission of his/her application to the Point of Presence Point of Presence-Service Provider (“POP-SP”).
2. The applicant should comply with the Know Your Customer (“KYC”) norms as detailed in the subscriber registration application form. All the documents required for KYC compliance need to be mandatorily submitted
3. Existing NPS subscriber cannot open another NPS account. In case of duplication of NPS account, CRA shall reject subscriber request.
*Note:
1. Currently, ICICI Securities Ltd. is not offering NPS to NRI
2. HUF, PIO, are not allowed to subscribe for NPS as per regulatory guidelines.
4. The applicant has to ensure that PRAN card application form is duly filled up i.e. photograph, signature, mandatory details, scheme preference details etc and submit within 30 days of online registration days of online registration which is mandatory as per guidelines, failing which CRA (NSDL/KARVY) shall deactivate your NPS (NSDL/KARVY) account.
5. Tier-I account: The applicant shall contribute his/her savings for retirement into this non-withdrawable account. This is the retirement account and applicant can claim tax benefits against the contributions made subject to the Income Tax rules in force.
Tier-II account: This is a voluntary savings facility. The applicant will be free to withdraw his/her savings from this account whenever he/she wishes. This is a not a retirement account and applicant can’t claim any tax benefits against contributions to this account.
Minimum contribution at the time of account opening and for all subsequent transactions – Rs. 500
· Minimum contribution per year - Rs 1,000 excluding any charges and taxes
· Minimum number of contributions in a year - 01
If the subscriber contributes less than Rs. 1000 in a year, his/her account would be frozen and further transactions will be allowed only after the account is reactivated
· In order to reactivate the account, the subscriber would have to pay the minimum contributions.
Minimum number of contributions in a year -01
· Minimum contribution at the time of account opening – Rs. 1000/- and for all subsequent transactions a minimum amount per contribution of Rs. 250/-
Under NPS, the manner in which your money is invested will depend upon subscriber’s own choice. NPS offers a number of funds and multiple investment options to choose from. In case subscriber does not want to exercise a choice, his/her money will be invested as per the "Auto Choice" option, where money will get invested in various type of schemes as per subscriber’s age. The NPS offers two approaches to invest subscriber’s money:
· Active choice – Individual Funds (Asset Class E, Asset Class C , Asset Class G & Asset Class A)
Subscriber will have the option to actively decide as to how his/her NPS pension wealth is to be invested in the following three options:
Asset Class E - Investments in predominantly equity market instruments.
Asset Class C- investments in fixed income instruments other than Government securities.
Asset Class G - investments in Government securities.
Asset Class A (Maximum allocation up to 5% of investment). Note: Investment in Asset Class A is available only for NPS Tier 1 account. - Investment in Commercial or Residential mortgage based securities, Units issued by Real Estate and/or Infrastructure Investment Trusts and/or Asset backed securities as regulated by SEBI, Alternative investment funds (AIF category I & II) registered with SEBI
Subscriber can choose to invest his/her entire pension wealth in C or G asset classes and up to a maximum of 75% in equity (Asset class E). Subscriber can also distribute his/her pension wealth across E, C and G asset classes, subject to such conditions as may be prescribed by Pension Fund Regulatory and Development Authority (“PFRDA”)
· Auto Choice – Lifecycle Fund
NPS offers an easy option for those participants who do not have the required knowledge to manage their NPS investments. In case subscribers are unable/unwilling to exercise any choice as regards asset allocation, their funds will be invested in accordance with the Auto Choice option. In this option, the investments will be made in a life-cycle fund. Here, the fraction of funds invested across three asset classes will be determined by a pre-defined portfolio.
Tax Benefit available to Individual:
Any individual who is Subscriber of NPS can claim tax deduction up to 10% of gross income under Sec 80 CCD (1) with in the overall ceiling of Rs. 1.5 lac under Sec 80 CCE.
Exclusive Tax Benefit to all NPS Subscribers u/s 80CCD (1B)
An additional deduction for investment up to Rs. 50,000 in NPS (Tier I account) is available exclusively to NPS subscribers under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under section 80C of Income Tax Act. 1961.
Tax Benefits under the Corporate Sector:
a. Corporate Subscriber:
Additional Tax Benefit is available to Subscribers under Corporate Sector, u/s 80CCD (2) of Income Tax Act. Employer's NPS contribution (for the benefit of employee) up to 10% of salary (Basic + DA), is deductible from taxable income, without any monetary limit.
b. Corporates
Employer’s Contribution towards NPS up to 10% of salary (Basic + DA) can be deducted as ‘Business Expense’ from their Profit & Loss Account
A. Upon attainment of the age of 60/65 years:
At least 40% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of annuity providing for monthly pension to the subscriber and balance is paid as lump sum payment to the subscriber. However, the subscriber has the option to defer the lump sum withdrawal till the age of 70 years.
In case of attainment of 60 years, exit before the age of Superannuation/attainment of 60 years, the subscribers can also initiate withdrawal requests in the CRA system which shall subsequently have to be verified by the Nodal Office (POP/Banks) in CRA system. www.cra-nsdl.com
B. At any time before attaining the age of 60/65 years:
At least 80% of the accumulated pension wealth of the subscriber needs to be utilized for purchase of annuity providing for monthly pension to the subscriber and the balance is paid as a lump sum payment to the subscriber.
C. Death of the subscriber:
The entire accumulated pension wealth (100%) would be paid to the nominee/legal heir of the subscriber and there would not be any purchase of annuity/monthly pension.
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