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Unlock Your Financial Future with the National Pension Scheme

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Unlock Your Financial Future with the National Pension Scheme

Introduction: 

In a world where financial security is paramount, the National Pension Scheme (NPS) emerges as a game-changer. It's not just about retirement; it's about securing your financial future.In this Blog, we'll delve into the National Pension Scheme, its objectives, types of NPS accounts, interest rates, and the multitude of benefits it offers.

What is NPS? 

The National Pension Scheme (NPS) is a visionary initiative by the Government of India, designed to provide retirement benefits to all citizens. NPS encourages a culture of saving for retirement, ensuring financial security during your golden years.

Objective of the National Pension System

The growing senior citizen demographic in India prompted the government to introduce schemes like NPS. It promotes systematic savings during your working years, instilling financial discipline for a secure future.

National Pension Scheme Details and Features 

Let's explore the key features of NPS that make it stand out:

  1. Liquidity and Flexibility via Two Different Account Types
    • Tier-I Account: Functions as a pension account with specific withdrawal restrictions, requiring a minimum deposit of Rs. 500.
    • Tier-II Account: Voluntary accounts offering liquidity through investments and withdrawals, with a minimum deposit of Rs. 250.
  2. Flexibility of Investment via Two Different Options
    • Auto Choice: Managed by a fund manager based on your age profile.
    • Active Choice: Allows individuals to choose their asset classes and allocation percentages.
  3. Option to Make Partial Withdrawals
    • Enables partial accessibility to your savings before retirement during emergencies, with specific conditions.

National Pension Scheme Eligibility 

Eligibility varies based on different NPS models:

  1. Government Sector National Pension System Model
    • Applicable to government employees (central and state), excluding armed forces.
    • Central government employees receive a 14% contribution from the government.
  2. Corporate Model of the National Pension System
    • Open to corporate employees aged 18 to 60, complying with KYC requirements.
    • Applicable to various entities under different acts.
  3. All Citizens Model of NPS
    • Available to all Indian citizens aged 18 to 60 meeting KYC requirements.

Types of NPS Accounts 

NPS offers two primary account types:

  • NPS Tier – 1 Account (Default)
    • Withdrawals not permitted.
    • Tax exemption up to Rs. 2 lakhs per annum.
    • Minimum contribution from ₹500 or ₹1000 per annum.
  • NPS Tier – 2 Account (Voluntary)
    • Permits withdrawals.
    • Tax exemption differs based on employment type.
    • Requires a minimum contribution of ₹250.

National Pension Scheme Returns 

NPS offers market-linked returns based on asset performance. The returns as of September 2023 are as follows:

NPS Tier 1 Returns (as of 27 September 2023)

Asset Classes

1-year returns (%)

5-year returns (%)

10-year returns (%)

Equity (Class E)

18.11%

13.18%

13.86%

Corporate Bonds (C)

7.68%

8.67%

9.06%

Government Bonds (G)

9.14%

9.18%

9.44%

Alternate Assets (A)

2.67%

7.13%

NA

NPS Tier 2 Returns (as of  27 September 2023)

Asset Classes

1-year returns (%)

5-year returns (%)

10-year returns (%)

Equity

18.47%

13.22%

13.36%

Corporate Bonds

5.13%

8.31%

9.03%

Government Bonds

8.90%

9.11%

9.43%

How to Apply for an NPS Account Online 

Registering for NPS is simple with the online platform eNPS. Here's how:

  1. Go to the eNPS portal on the official National Pension System website.
  2. Select your subscriber type: 'Individual Subscriber' or 'Corporate Subscriber.'
  3. Choose your residential status ('Citizen of India' or 'NRI').
  4. Opt for Tier I account or both accounts (Tier I is mandatory for long-term savings).
  5. Enter your PAN details and select a suitable bank or PoP for KYC verification.
  6. Upload scanned copies of your PAN card, canceled check, photograph, and signature.
  7. Proceed to pay the required charges via net banking.
  8. Once the payment is completed, your Permanent Retirement Account Number (PRAN) will be generated.

How to Apply for an NPS Account Offline 

To open an NPS account offline:

  1. Locate a Point of Presence (PoP), often a bank.
  2. Collect a subscriber form and submit it with your KYC documents.
  3. If KYC is already completed with that bank, no additional KYC is needed.
  4. Once you make the initial contribution (not less than Rs. 500), the PoP will issue your PRAN.

How to Log In to the NPS Account 

To access your NPS account:

  1. Obtain your 12-digit PRAN by submitting the required documentation.
  2. Visit the eNPS login page [insert link].
  3. If you're a first-time visitor or forget your password, click on 'Generate/Reset password.'
  4. Enter your PRAN, date of birth, and captcha to generate an OTP.
  5. Validate your password by entering the OTP received on your registered mobile number.
  6. Enter your PRAN, password, and captcha, then select 'Login' to access your account.

National Pension Scheme Benefits 

NPS offers tax benefits under various sections of the Income Tax Act:

  • U/S 80CCD (1): Deductions for the subscriber's contributions towards Tier I investments within the Rs. 1.5 lakh limit under section 80C.
  • U/S 80CCD 1(B): Additional deductions of up to Rs. 50,000 for Tier I contributions.
  • U/S 80CCD (2): Employer contributions towards Tier I investments are eligible for deductions (14% for central government contributions and 10% for others) over and above the 80C limit.

Apart from these, NPS provides other tax benefits on Tier I investments:

  • Up to 25% of Tier I contributions withdrawn by a subscriber are tax-exempt.
  • Annuity purchases from the NPS corpus are tax-exempt, with subsequent annuity-generated

In conclusion

National Pension Scheme (NPS) is not just an investment; it's a roadmap to financial security during your retirement years. With its flexible account options, market-linked returns, and tax benefits, NPS empowers you to build a substantial corpus for a worry-free retirement.

Whether you're a government employee, a corporate professional, or an Indian citizen looking to secure your future, NPS offers a tailored solution to meet your retirement goals. It's a step towards financial discipline, systematic savings, and a stress-free retirement.

So, don't wait; unlock your financial future with NPS today. Start planning for the retirement you deserve and ensure that your golden years are truly golden. Invest in NPS and embark on a journey towards financial freedom and peace of mind. Your future self will thank you for it. 

Product Team

Wise Funds

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