What Is NPS?
National Pension System (NPS) is India’s simplest and perhaps the least cost pension system.
NPS was introduced by the Central Government on 1st January 2004, and is regulated by Pension Fund Regulatory and Development Authority (PFRDA).
On 1st May 2009, National Pension System was extended to all citizens of India on a voluntary basis. NRIs can also apply. Reliance Capital Ltd (RCL) has been appointed as one of the Point of Presence (PoP) for registering applicants to the NPS. On registration to the NPS, the subscriber will be issued a Permanent Retirement Account Number (PRAN) by the PFRDA.
What are the salient features of the Scheme?
NPS is a low cost, highly regulated, safe and convenient tool for building a retirement corpus. NPS has been conceived, designed and regulated by the Govt. of India. PFRDA is the regulator for NPS.
What is the eligibility Criteria for this scheme?
Anybody who is a citizen of India (Resident or Non Resident) between the age of 18-60 years can open an NPS Account.
What are the Tax Benefits of investing in NPS?
For Corporate employees, an additional Tax Exemption limit of an amount equivalent to 10% of Basic salary over and above the current limit of Rs. 1 Lakh is available. The applicable Section is 80CCD(2) of the Income Tax Act, 1961.
This benefit was brought post the Union Budget 2011-2012 wherein special tax treatment has been given to NPS contributions by employees of Corporates. Employer can deduct and contribute to employee’s NPS account up to 10% of Basic salary. The entire amount so contributed will be exempted from tax as per provisions of Section 80CCD(2) of the Income Tax Act, 1961.
Moreover, for employees who opt for NPS contribution through Salary Process, there is no need to submit additional proof for claiming the tax deductions. The contributions made would get automatically taken care of for your Income Tax computation for the Financial Year.
Where and how to open an account?
NPS account can be opened by submitting Subscriber Registration form with KYC documents and the contribution amount to a POP (Point of Presence) appointed by Govt. of India. RCL is one of the leading POP appointed by Govt. of India since inception of the scheme.
What is the meaning of Investment Option?
In the registration form, you need to indicate the choice of fund manager and percentage wise allocation amongst the following asset classes.
Asset Class E: Equity
Asset Class C: Corporate Bonds
Asset Class G: Government Bonds
What Does Active choice and Auto Choice mean?
Subscribers can allocate their investments in Class E, C and G as per their choice with an upper limit of 50% in Class E and remaining in asset class C and G.
Subscribers can opt for auto choice where the allocation to Class E, C and G is done as per the Life Cycle table provided in the Offer document.
Can I change my Investment Option?
Yes, you can change your investment options (Asset allocation and / or fund manager) once in a financial year.
Where can I give my service requests?
You can email your service requests quoting your Permanent Retirement Account Number (PRAN) to firstname.lastname@example.org
or call on 022- 3320 1334/ 1414
What are the Fund Management Charges of Pension Fund Managers?
Fund management fees are enviably low at 0.25% as against 1.5% to 2% charged by fund managers of other pension schemes/ mutual fund schemes.
What is the minimum contribution for this scheme?
The minimum contribution amount for this scheme is Rs 6000/- in a financial year. The contribution can be made in one installment or in multiple installments subject to minimum of Rs. 500/-.
What happens if a subscriber fails to contribute the minimum amount?
In case a subscriber fails to contribute minimum Rs. 6000/- in a financial year, the account would become dormant. To activate the account, the subscriber would have to pay the minimum contribution for the entire period of dormancy along with a penalty of Rs 100/- per year of dormancy.
What are the nomination facilities under NPS?
Although nomination is not compulsory, it is always advisable to have a nominee registered in the account. While filling up the NPS form, you can nominate upto a maximum of 3 nominees. In case a nominee being a minor, you need to provide the details of the guardian and date of birth of the minor. The nominee will have an option to receive 100% of the lump sum or continue to subscribe to NPS on his/her own by completing the account opening formalities.
What returns will I earn on my investments?
Your contribution will not earn any specified rate of return. The Pension Fund Manager (PFM) will invest your savings in a scheme of your choice. The returns earned by the PFM on the scheme selected by you, will be credited to your account.
What are the fees and charges of POP for subscribing to NPS?
An amount of Rs.100/- will be deducted towards Account Opening fees as a onetime charge. A contribution upload charge of 0.25% of the contribution amount subject to a minimum of Rs.20 will be deducted from each contribution deposited by the subscriber. For schedule of charges and fees please refer to the Charges section in the offer document.
Do POPs have the liberty to determine their charges?
No, Charges of POP are defined by the PFRDA, Govt. of India. POPs have to charge within this charge structure.
What is the age of retirement?
What will happen of my funds at the time of retirement?
You will be required to annuitize minimum 40% of your savings to purchase an annuity scheme from a life insurance company of your choice. One can purchase annuity for more than 40% also.
Remaining 60% can be withdrawn as a lump sum within 10 years of retirement, i.e. before 70 years of age.
Can I opt for retirement before the age of 60?
Yes. You will be required to use 80% of your savings to purchase the annuity. You will be able to withdraw the balance 20% of your savings as a lump sum.
Can I have a joint account for this scheme?
Can an individual open two account in NPS.
No, only one account can be opened per individual as a unique PRAN number is allotted to an individual.
Will the annuity also provide for a family (survivor) pension?
Yes. You will have an option of selecting an annuity which will pay a survivor pension to your spouse/dependant
Can I track my portfolio online?
Yes, on registration to NPS, you will receive a Welcome Kit with your online login ID and password which helps you to track your portfolio and view your profile online on the CRA-NSDL site: http://www.npscra.nsdl.co.in
Can I track daily NAV (Net Asset Value) of the scheme?
Yes, you can view the daily NAV on CRA site.
What is the difference between Tier I and Tier II account?
The Tier-I and the Tier-II accounts primarily differ in respect of their taxability and withdrawal limitations. Further, the amount of minimum subscription per contribution as well as aggregate subscription in each account in each year also differs with respect to both the accounts.
Can an individual opt for Tier II account only.
No, one has to compulsorily open a Tier I NPS account to open a Tier II account.
How can I subscribe to NPS via Salary Process?
You can opt for NPS by giving a declaration to HR team indicating the contribution amount (max up to 10% of basic salary). Post declaration, you will have to complete the NPS Registration Form and submit to RCPFL. Post the submission, RCPFL would complete all the formalities. Once your account number is received from Reliance Capital Limited (RCL), your contribution will be transferred to RCL for depositing in your account. The entire process may take upto 20 working days.
Employees, who already have a NPS account, need to give “Inter Sector Shifting Form” to RCPFL, with a copy of his/her PRAN Card. If their POP is other than RCL, they need to submit POP Change Request form in addition.
Completed Registration Forms will be sent to RCL for processing along with your contribution amount. You will receive your Welcome Kit within 15 days directly from NSDL at your current address mentioned in the application form. Welcome Kit will contain welcome letter with your Permanent Retirement Account Number (PRAN) and the internet password and PRAN Card.
Monthly contribution will be deducted from your salary and deposited in your NPS Account. Every time a contribution is deposited in your account, you will receive an SMS and email alert.
How much can I contribute to NPS via Salary Process?
You can contribute maximum. upto 10% of your basic salary. If you want to contribute an additional amount to your NPS account, you may deposit the amount through Cheque/DD in favour of “Reliance Capital Ltd. Collection A/c- NPS Trust”. For regular contribution, you can give an ECS Mandate specifying the amount and frequency of contribution.
Is there any tax benefit available to the additional contribution?
Yes. The additional contributions which are made directly into your NPS account qualify for tax exemption within the combined limit of Rs. 1 Lakh on investments in PF, Life Insurance, etc, under Section 80C of the Income Tax Act, 1961.
Will contribution through salary change with change in Basic Salary?
If you have requested for salary debit amount as % of Basic Salary, any change in Basic Salary will automatically lead to adjustment of the contribution amount.
How will my contributions be processed?
The monthly amount deducted from the salary will be transferred by HR team to Reliance Capital NPS A/c. RCL will process your monthly contribution. The amount will be credited in your NPS Account within 7 working days. Thereafter, you will receive a SMS and Email alert once the amount is credited to your account.
What will happen to this account if I leave the organization?
Your NPS Account will continue to be operative. You would be able to contribute regular contribution to this account through your new employer if the new employer happens to have the facility in place, else you could sign an ECS Mandate with RCL for regular contribution from your designated bank account.
In case of queries regarding NPS application process whom should I contact?