The National Pension System, commonly referred to as NPS is a voluntary, contribution retirement savings scheme and that has been designed to enable systematic savings during the subscriber's working life.Bank of India is registered with PFRDA (Pension Fund Regulatory and Development Authority) as POP (Point of Presence) for NPS under All Citizen Scheme and as an aggregator for the purpose of processing NPS Accounts (Tier-I and Tier-II) as well as acceptance of contributions.
The Government of India (GOI) rolled out the NPS scheme for all citizens of India from May 1, 2009. The person (employee/citizen) who joins the NPS scheme is a "subscriber". Under the NPS, each subscriber opens an account with the Central Recordkeeping Agency (CRA), which is identified through a unique Permanent Retirement Account Number (PRAN).
Under the scheme, two types of NPS accounts are available to subscribers- Tier I & Tier II.
The Tier I NPS account is meant for subscribers to contribute their savings for retirement into a non-withdrawable account. These savings can include an employer’s contribution to NPS, in case of the corporate sector.
The Tier II NPS account is a voluntary savings account from which subscribers are free to withdraw their savings whenever they wish. The facility of Tier II account was made available from December 1, 2009, to all citizens of India including government employees and corporate sector subscribers who are not mandatorily covered under the NPS
An active Tier I account is a pre-requisite for opening a Tier II NPS account
Any Indian citizen, whether resident or non-resident/ Overseas Citizen of India (OCI), can apply for an NPS account opening. However, those who apply to the NPS scheme must be between 18 to 70years of age as on the submission date of his/her application.
Citizens can join the NPS scheme either as employee-employer group(s) (corporates) or individuals, subject to submission of all the required information and know your customer (KYC) documentation. Subscribers over 60 years of age can make further contributions to their NPS account till they attain 75 years of age.
Opening an NPS account offers several advantages to subscribers. Some of the benefits of the NPS account are mentioned below:
- NPS is voluntary - NPS scheme is open to every Indian citizen. As an NPS account subscriber, you can choose the amount of contribution to the NPS scheme every year.
- NPS is simple - NPS account opening is an easy process. You only need to open an account with our bank and get a PRAN for the NPS scheme.
- NPS is flexible- As a pension system, the NPS lets you choose your own NPS investment option and fund scheme. This NPS account feature helps you grow your money as per your financial goals.
- NPS is portable portable - You can operate your NPS account from anywhere in the country, even if you change your city, job or pension fund manager.
- NPS is regulated - The NPS scheme is regulated by the development authority PFRDA, with transparent investment norms, regular monitoring and a performance review of fund managers by the NPS Trust.
NPS Scheme Tax Benefits for Individuals
Any individual who is a subscriber of the NPS can claim a tax deduction up to 10% of the gross income under Section 80CCD (1) within the overall ceiling of Rs.1.5 lakh, under section 80CCE.
NPS Scheme Tax Benefits for Corporate Subscribers
An additional NPS tax benefit is available to subscribers from the corporate sector under section 80CCD (2) of Income Tax Act. The employer’s NPS contribution (towards the employee) up to 10% of salary (Basic + DA), without any monetary limit, is deductible from the taxable income
Exclusive NPS Tax Benefits for subscribers u/s 80CCD(1B)
An additional deduction for the NPS investment up to Rs.50,000 (Tier I account) is exclusively available for the NPS scheme under subsection 80CCD (1B). This is over and above the deduction of Rs.1.5 lakh available under section 80C of the Income Tax Act,1961
A Subscriber is required to make initial contribution (minimum of Rs.500 for Tier I and a minimum of Rs.1000 for Tier II) at the time of registration. Subsequently, a Subscriber can make contribution subject to the following conditions:
Tier I:
- Minimum amount per contribution - Rs.500
- Minimum contribution per Financial Year - Rs.1,000
- Minimum number of contributions in a Financial Year – one
- Over and above the mandated limit of a minimum of one contribution in Tier I, a Subscriber may decide on the frequency of the contributions across the year as per his / her convenience.
Tier II:
Minimum amount per contribution - Rs.250
No minimum balance required
