Back to Blog Technology’s role in shaping customer preferences June 20, 2022 Becoming profitable is the primary objective of any business, and in the process, they try to operate by getting ahead of their competition. Getting ahead of the competition depends highly on your brand’s perception and acceptance among consumers. Being accepted by consumers ensures that a company grows and flourishes to strengthen its market position and increase its customer base. However, with the increase in the use of technology, there has also been a change in the behaviour of consumers. As per stats by InternetLiveStats, Google processes over 40,000 search queries per second. According to Oberlo, 27.6% of the global population shops online. This reflects the impact that brands can have with a strong digital presence. While technology has helped many businesses scale up their operations, it has also caused the customer’s mindset and behaviour to evolve, which must be taken into consideration by brands. As a brand, you should always evolve along with the consumer in order to remain competitive and relevant in these changing times. Let us take a look at a few ways in which customer preferences are changing, and how you can leverage them. Decreased attention spans The amount of content online is increasing massively with every passing day, and consumers are flooded with more content than they can realistically interact with on any given day. This abundance of content decreases the attention span of your consumers and visitors to such an extent that you must grab their attention within a few seconds, or they are gone. According to Facebook, consumers spend a maximum of 2 seconds when viewing a piece of content on their smartphones. You need to get your message across in the quickest and most effective manner possible for it to be heard completely, and hope at getting a conversion. The key is to highlight the benefits presented by the product or service that your company is providing. Ensure that it stands out and speaks to the consumer in a manner that is easily understood. In the financial world, it is necessary to put the message across in the simplest way possible so that the content can be easily consumed and understood. Making the world a smaller place The increase in the use of technology and the internet has truly made the world a smaller place. Consumers are more connected to businesses than ever before. They have the capability to research, review and question your products or services, irrespective of their physical location. According to GlobalWebIndex, social media is used to research products by 54% of the users. With the increase in the use of social media, consumers are enabled to interact with your brand directly. This lets them ask questions and also influences their purchasing decisions to an extent. With the hyper-connectivity that consumers are being subjected to, there is an increasing sphere of opportunities of engagement towards new, as well as existing customers. Nevertheless, you must ensure that your communication breaks the clutter and fulfils the demands of your consumers. This change in consumer behaviour can be taken advantage of by ensuring that your brand has a strong presence on both social media and digital platforms. Creating a dynamic digital ecosystem, coupled with an omnichannel marketing strategy ensures that you check all boxes and are reachable by consumers all the time. Providing consumers with an experience that is cohesive, irrespective of the channel ensures that you retain them. The urge for personalization Consumers crave attention, and desire products that are created after taking their individual preferences and interests into consideration. This gives them a feeling of personalization, which enhances their trust and affinity towards your brand. With the increase in technology, globalisation has also increased. This has caused many brands, offering similar services and products, to pop up. With so many similar options to choose from, consumers are spoilt for choice. In this scenario, personalization is a massive influencing factor. According to Khoros, 86% of brands convert one-time clients into long-term customers by giving them a satisfactory experience. In order to cater to consumers on a personal level, the first thing that you need to do is get a comprehensive understanding of your target market, and direct tonality in a manner that they speak to your audience on an individual level. Nearly all financial products or services should be prepared in a manner that is tailored to fulfil the consumer’s needs. Increasing consumer expectations With an increasing number of brands entering the market, the expectations of consumers are sky high. Consumers nowadays look for a one-stop solution that caters to all their needs. They expect a targeted approach from companies in terms of communication, products and services, with responsive customer service that caters to their needs on demand. If a consumer faces even the slightest inconvenience in getting the desired product or customer service, they will switch to a competitor with the same offerings without the slightest hesitation. According to a report by Zendesk, nearly 80% of users switch to a competitor because of one bad experience. The bar for customer satisfaction is set extremely highly, with more and more companies entering the market, and looking for the same target audience. For your business to work, and succeed, in this highly competitive environment, you need to analyse your consumer’s behaviours minutely, and devise strategies that extensively caters to all their needs. In today’s always online, hyper-connected world, you should form plans that give you an edge over your competitors, and gain for you a stable market share. Featured Posts How Technology Is Transforming Mutual Fund Management and Investment Solutions in IndiaHow are MFDs at the core of India’s investment ecosystem? Give it a read.What are the Challenges for MFDs, and How Mutual Fund Software Solves Them?How are the mutual fund solutions empowering MFDs? Read in the blog. The Role of a Mutual Fund Advisor in Creating Financial Success
Back to Blog New Rules for NPS Fund Managers and their Impact on Your Returns June 10, 2022 The National Pension Scheme (NPS) has undergone various changes since its inception. They are sometimes linked to NPS withdrawal rules, while at other times, they are related to NPS exit rules. This time, however, against everyone’s expectations, the Pension Fund Regulatory and Development Authority (PFRDA) proposed changes that apply to fund managers, but have an impact on subscribers. Before discussing them in detail, let’s first understand what NPS is. What is the National Pension Scheme? The National Pension Scheme is a voluntary investment plan launched to secure your retirement. This retirement scheme is under the purview of the central government and the Pension Fund Regulatory and Development Authority (PFRDA). The NPS was initially accessible to government employees, but in 2009, it was made available to all Indian citizens aged 18 to 60 years. You can make an investment in the NPS until the age of 60 years. After that, you can withdraw 60% of the corpus and use the remaining 40% to buy an annuity plan. NPS New Rules 2021 Since the launch of NPS, the scheme has seen several alterations. The new ones are listed below. Investment in mid-cap stocks Previously, NPS fund managers were limited to investing in companies that were traded on the Futures and Options market. In addition, the funds must be invested in companies with a minimum market cap of ₹5,000 crores. As a result, the fund managers’ only alternative is to invest in the top 100 large-cap funds. Fund managers can now invest funds in the top 200 companies (100 large-cap and 100 mid-cap). Investment in Initial Public Offerings (IPOs) The new NPS rule permits fund managers to invest in firms that are set to go public, though there is one prerequisite to investing in an IPO. They cannot invest in them if their market capitalisation is less than that of the 200th company from the top. It means that any large IPO with a market capitalisation of more than ₹21,200 crores can be added to your NPS portfolio. Investment in more group companies Earlier, fund managers could only invest 5% of the equity spread of funds in group companies; the new NPS rule states that the 5% cap applies to the total portfolio rather than just equity. How Will the New Rules Affect the NPS Subscribers? The ability to invest in mid-cap companies has opened up a slew of new possibilities. Between large-cap and mid-cap companies, you will notice that mid-cap companies have more growth potential. Companies that are newly listed can give substantially better returns than those that are already listed. However, there are certain challenges in front of NPS fund managers in this case. Even a look into a company’s financials, cannot determine how stocks would be welcomed by investors. The permit to allocate more funds towards group companies provides fund managers with more flexibility. As an NPS member, your returns will be multiplied if you have exposure to a group firm with strong growth prospects. To Conclude: The new NPS rules are mainly related to equities. The broader investment options may improve returns over time. Yet, you must not forget that higher returns come with higher risks, especially in the context of equity. Therefore, as an NPS subscriber, keep track of your investment’s performance. Change your NPS fund manager if you believe your portfolio is underperforming. Featured Posts NPS New Rules 2026: A More Flexible Path to Retirement PlanningA Simple Guide to NPS Registration and Online Account OpeningNPS Vatsalya: Building Financial Security for the Next GenerationPlanning for Retirement with NPS: This Blog Might Be For You!NPS Returns and Retirement Planning: What Every Investor Should Know
Back to Blog Factors to consider when making investment decisions June 9, 2022 It is important to make investments that help fulfil your financial goals and ensure that you have a stable and secure future, but be aware that this is not always an easy process. There are several factors you need to consider that can influence your decisions. It is crucial that you make the right choice, and the right investments for you. Although there are several financial instruments that can help you build a corpus, not all of them may be suitable for you. It is important for you to know which investment format is good for you, and which ones best fit your financial needs. Let us take a look at a few such factors that you must consider while making an investment decision. Reason of investment The first, and most important thing to consider is the reason for making an investment. While it is true that investments are the key to a financially successful future, it is also important to understand that not all investment vehicles are the same. Each investment objective has it’s own pros and cons and a different objective. You must have a clear objective for your investments and then arrive at the right investment choice for you. In simple terms, if you are looking for a short term goal, the investment modes would be different than the financial instruments which cater to long term goals. Knowing your investment reason, and fixing on a goal gives you clarity on which investment vehicle is right for you. Researching the market Making an investment is an important decision, one which can alter your future significantly. Therefore, it is always advisable to conduct thorough market research before you make an investment decision. Doing this will help you understand the current market and give you an idea of the companies you should invest in. Knowing your investment goal and the type of investment you want to make, along with having a good understanding of the market, will enable you to make investment decisions that are best suited for you and help you succeed. Risk levels Nearly all investment vehicles carry with them some kind of risk. Therefore, it is important to understand the risk associated with the investment before you get involved. Your risk appetite should dictate your investments to help you make the most of your investments. If you want to ensure that your principal investment remains safe, go for lower risk investments, though the returns on those may not be high. If you’re looking for high returns and do not mind taking a few risks, then your investments will look a little different. Investment Tenure Your financial goals must have a time limit, which implies that the investments you make also have a specific tenure. The longer you make investments into one instrument, the higher corpus you are able to build for yourself. You also have a higher chance of earning a profit if the investment tenure is long term. However, not all investments provide a guarantee of positive returns. Depending on your financial goal, and the reason for investment, you should decide upon the duration for your investment. Taxations Before you make investment decisions, it is important to consider the taxation rules, and potential tax implications that may arise in the future. The reason is that different investments cause different taxation levels, which can affect your investment returns. It is imperative to understand the taxation laws and regulations before arriving at your investment. Understanding tax laws help you make sound investment decisions, which can help protect your financial future. Liquidity When making an investment decision, you should consider that you may have to liquidate that investment to meet other unforeseen needs. You should also consider the appreciation of value for your investment in the long run. If your chosen investment has long term potential and has high liquidity, as an investor, you can take advantage of the price movements in the market, and easily sell the investment if you wish. Volatility Volatility can be defined as the measure of how much the price of your asset can fluctuate over time. This can be a key influencer in your financial decisions, and is one of the most important factors to consider. Depending on your risk appetite, you should consider the volatility of your investment. This can highly influence your investment decisions, based on your investment objectives. For example, if you are investing for the purpose of a retirement plan, you are likely to invest in an instrument that has consistent returns with low volatility. The Company Before you invest in a company, it is imperative that you conduct a full research about the company, its operations, finances, and market projections. This gives you an idea of whether it is a good idea to invest in the company, and whether you see your financial goals get fulfilled by making the investment. Return on Investment The ROI, or Return on Investment is one of the key determinants to consider when making investment decisions. The entire point of making an investment is to generate returns and garner profits. Therefore, you must always consider your ROI when making financial decisions. An ROI can help you measure the profitability of your investment in relation to the principal amount. In case you decide that your investment is not generating enough ROI, you can stop investing in that instrument, and look for better options. Rate of Inflation Inflation is real, and it is something that is beyond your control. Therefore, it is a crucial factor that you must consider when making investment decisions. Over time, inflation can kill your savings, and erode your investment value. You should consider the effects of inflation on your investments before you make them. We hope a better understanding of the factors you should consider before you make an investment decision will help you make sound choices and have a successful financial future. However, nearly all investments are subject to market risks, and you should always consult your financial advisor before you make a decision on investments. Featured Posts How Technology Is Transforming Mutual Fund Management and Investment Solutions in IndiaHow are MFDs at the core of India’s investment ecosystem? Give it a read.What are the Challenges for MFDs, and How Mutual Fund Software Solves Them?How are the mutual fund solutions empowering MFDs? Read in the blog. The Role of a Mutual Fund Advisor in Creating Financial Success
Back to Blog What are the Eligibility Criteria for the National Pension System? June 8, 2022 In 2004, the National Pension Scheme (NPS) was introduced for salaried individuals as an alternative to the Employee Provident Fund (EPF). The scheme was later extended to all individuals meeting the NPS eligibility criteria. The scheme aims to provide all Indian citizens with a regular income during their old-age and enhance social security in the country. What is the NPS? The National Pension Scheme (NPS), earlier called the New Pension Scheme, is a pension cum investment scheme. It is offered by the Government of India to guarantee old age security to Indian citizens. NPS invests the subscribers’ contributions into several market-linked instruments like debt and equity. The pension amount received after retirement depends on the performance of these investments. NPS Eligibility Norms The scheme is offered to private sector employees, government employees, and self-employed professionals.The NPS age eligibility is between 18 years and 60 years, at the time of application submission.The subscriber must submit valid KYC documents, such as Aadhaar Card, PAN Card, Voter ID, bank statement, etc.Both resident and non-resident Indians meeting the age criteria can open an NPS account. The NPS account of a non-resident Indian (NRI) is regulated by the Reserve Bank of India (RBI) and the Foreign Exchange Management Act, 1999 (FEMA). Documents Required to Open an NPS Account Once you fulfil the National Pension Scheme eligibility, you need to submit the following documents to open and maintain an NPS account: Subscriber registration formA passport-sized photographProof of address (Driving license, Passport, Aadhaar Card)Proof of identityProof of age or date of birthA cancelled cheque, if required Types of NPS Accounts There are two types of NPS accounts available to a subscriber. A Tier-1 account is mandatory, while Tier-2 accounts are voluntary. Tier-1 account: Subscribers use this account to contribute towards their pension from their savings. Withdrawals are restricted until retirement. The subscriber can claim tax benefits against the contributions made as per existing income tax policies.Tier-2 account: This account is optional and for investment purposes only. The applicant can withdraw from this account when required. Investments in NPS tier-2 accounts are not eligible for tax benefits. Check your eligibility for NPS Can I open multiple NPS accounts? An individual cannot open more than one NPS account. However, the applicant can open one account in NPS and another in the Atal Pension Yojna. Can I open a joint NPS account? As per the National Pension Scheme eligibility criteria, the subscriber must apply in an individual capacity. One cannot open or operate the account jointly with a spouse, child, relative, or on behalf of HUF. Can I open an NPS account if I have a PPF or any other pension plan? Yes, even if you contribute towards the EPF or you have an investment in the PPF, you fulfil the eligibility for opening an NPS account. Summing up The National Pension Scheme brings an attractive long-term saving avenue, helping individuals plan their retirement effectively.Additionally, like other pension plans, the National Pension Scheme too makes use of compounding interest for calculating the returns. Featured Posts NPS New Rules 2026: A More Flexible Path to Retirement PlanningA Simple Guide to NPS Registration and Online Account OpeningNPS Vatsalya: Building Financial Security for the Next GenerationPlanning for Retirement with NPS: This Blog Might Be For You!NPS Returns and Retirement Planning: What Every Investor Should Know
Back to Blog How to Successfully Plan for Retirement? June 7, 2022 Retirement planning can be confusing and intimidating, with multiple financial products in the market, from both private and public sector entities, all advertising various benefits. Finding the one that suits your requirements, counters inflation, and offers you financial security can seem like a gamble. Some government-backed savings options can provide you with a safety net after your retirement, providing a regular income and comfort in your older years. The National Pension Scheme(NPS) is one such option that can be a great retirement companion. Let’s find out more about how to join NPS and use it to successfully plan for your retirement. What is NPS Investment? NPS is a voluntary social security scheme offered by the Central Government to employees from the public, private and unorganised sectors, with the only exception being people from the armed forces. It allows you to make regular contributions towards your retirement during your working years. After the age of 60, you can withdraw a part of the corpus in a lump sum, while the remaining portion is used to purchase an annuity plan for your future financial needs. Why to Invest in NPS? NPS is a dependable scheme that can offer you peace of mind and an adequate means of income after your retirement. If you are in two minds about how it can benefit you, here are some things to know: Help your money grow: NPS invests your money in a combination of securities, including equity, corporate debt, government bonds, as well as alternative investment funds. Overall, these help you create wealth without exposing you to too much risk. The NPS schemedraws a good balance between high-risk equity and low-risk bonds. The equity investment is gradually reduced by 2.5% each year, after you turn 50. This allows your money to grow in value and beat inflation without putting you in a high-risk situation.You can use an NPS calculator for more clarity on returns. Financial security in retirement: You can withdraw your money from the NPS account after the age of 60 years. 60% of the total corpus can be withdrawn and used for your immediate needs. This could be to buy or renovate a house, travel, cover medical bills, or cater to any other needs that you might have. The remaining 40% is invested in an annuity of your choice, from a Pension Fund Regulatory and Development Authority (PFRDA)-registered insurance company. This ensures that you receive a regular income for life. The primary goal of the NPS is to replicate your income in retirement. Even though you won’t be working, you will still have a steady income to depend on. Control your investments: The NPS schemeoffers two options to manage your investments – auto and active choice. The auto choice automatically decides your asset allocation as per your age. This option follows the life-cycle based approach (moderate, conservative, and aggressive), which invests in equity when you are young and gradually moves to lower risk options as you age. The active choice lets you pick the asset class allocation on your own. You can decide which way to go based on your preference and goals. You also have the option to change your fund manager if you do not like performance of your current one and find that your investment has not shown sufficient growth. Save tax: NPS is an excellent tax-saving tool. You can avail of a tax deduction of up to ₹1.5 lakh per annum under Section 80C of the Income Tax Act, 1961. You can claim an additional deduction of ₹50,000 under Section 80CCD (1B). Further, if your employer is contributing to your NPS, you can claim another tax deduction of up to 10% of your salary, including the basic pay and dearness allowance or equal to the contributions made by the employer towards the NPS under Section 80CCD (2). To sum it up With it government backing, balance between risk and returns and the tax savings it offers, NPS can be the perfect financial tool for retirement planning.Moreover, the minimum investment is only ₹500 for Tier I and ₹250 for Tier II accounts at registration, making it ideal for all income groups. You can use an NPS return calculatorandstart planning a successful retirement today. Featured Posts NPS New Rules 2026: A More Flexible Path to Retirement PlanningA Simple Guide to NPS Registration and Online Account OpeningNPS Vatsalya: Building Financial Security for the Next GenerationPlanning for Retirement with NPS: This Blog Might Be For You!NPS Returns and Retirement Planning: What Every Investor Should Know
Back to Blog Do I Need to Be Employed by The Government To Join NPS? June 6, 2022 The National Pension Scheme (NPS) is one of the best investment initiatives offered by the Government of India. It came into existence in early 2004 and is aimed at providing an old-age income to senior citizens. The scheme ensures that they receive security coverage post-retirement. Initially, the program offered NPS for central government employees only. Later, it was opened to all citizens, including private-sector employees and self-employed professionals. NPS is one of many investment products that lets subscribers regularly contribute during a financial year. Such a plan helps to build a corpus in the pension account. The NPS contribution for central government employees is made during the employment period. After retirement, subscribers can withdraw a part of the contribution. The remaining is received as a monthly pension. The subscriber can also choose to invest the unused part in other investment options. Structure of Pension Scheme for Central Government Employees There is not much difference between the state and central government pension schemes. They also don’t differ much from the schemes offered to public or corporate employees. NPS for central government employees also extends to the central autonomous bodies like the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI). Likewise, the NPS for state government employees also extends to autonomous state bodies like the Delhi Development Authority (DDA) or the National Power Training Institute (NPTI). The account structure for Tier 1 and Tier 2 accounts is also the same across entities. The NPS contribution for state government employees and the tax benefits are all the same as well. The pay and accounts officer (PAO) is responsible for the salary disbursal of government employees. The officer also supervises statutory deductions. The nodal officer also plays a vital role since they form the connection between the subscribers and the Pension Fund Regulatory and Development Authority (PFRDA). At the nodal office, the Drawing and Disbursal officer (DDO) receives the NPS application form for state government employees, withdrawal requests, verification, and application for modification of details. The DDO forwards these requests to the CRA for processing. NPS Account Opening Rules As soon as government employees join the service, they can open an NPS account. All they need to do is fill out the necessary details in the NPS form for state govt employees. NPS Income Tax Benefit An NPS subscriber is entitled to claim tax deductions of up to ₹1,50,000 under Section 80C of the Income Tax Act. Moreover, the account holder can claim an additional deduction of ₹50,000 for investment in NPS Tier 1 account under Section 80CCD (1B). This totals the deductions to ₹2 lakh. Wrapping Up A government employee contributes more than the mandatory limit of 10 percent in the Tier 1 account. But the government does not make any matching contribution. Employees can choose an investment pattern from the list of pension funds available for government servants. Featured Posts NPS New Rules 2026: A More Flexible Path to Retirement PlanningA Simple Guide to NPS Registration and Online Account OpeningNPS Vatsalya: Building Financial Security for the Next GenerationPlanning for Retirement with NPS: This Blog Might Be For You!NPS Returns and Retirement Planning: What Every Investor Should Know
Back to Blog Functions of PFRDA (Pension Fund Regulatory & Development Authority) June 5, 2022 The Government of India has initiated many programs for senior citizen over the years. These programs aim at fixing monthly pension schemes after retirement. In 2003, Parliament passed the Interim Pension Fund Regulatory and Development Authority Bill. The goal was to promote, regulate, and develop a pension system in the country. After the preparation of the final system in 2013, the PFRDA came into being. It was an improved version of IPRDA and is a permanent act. It is the regulatory body for supervising the National Pension Scheme. Earlier, the National Pension Scheme by PFRDA was for government employees only. But it was later extended to all Indian citizens. This includes non-resident Indians (NRI) and self-employed citizens. Pension Fund Regulatory and Development Authority and its Functions The PFRDA is the pension regulator for the National Pension Scheme. It functions towards the promotion and development of pension schemes. The Central Autonomous Body (CAB) has legislative, executive, and judicial powers. It is like other financial sector regulators in the country. These bodies include SEBI, RBI, IRDA, etc. It is a quasi-government organisation. The Indian government provides support, but the management is private. The regulatory body has its headquarters in New Delhi. There are many regional offices across the country. A list of PFRDA functions is as follows: Promoting pension schemes to secure the old age financial requirements of retired individualsRegulating the pension schemes that fall under the PFRDA act (NPS and Atal Pension Yojana)Protecting the interests of pension fund subscribersGoverning and supervising Tier-1 and Tier-2 accounts of the NPSRegistering and regulating intermediaries like Central Record-Keeping Agency (CRA), Pension Fund Managers, etc.Training intermediaries to familiarise and educate people on the importance of pension fundsEducating stakeholders and the general public about the benefits of PFRDA NPSApproving schemes and formulating the guidelines for managing pension fund corpusEstablishing a grievance redressal mechanismAddressing grievances on the various pension schemes in the countryRegulating the regulated assets Online Services of PFRDA It is easy to apply for NPS both offline and online. The Pension Fund Regulatory and Development Authority (PFRDA) takes care of the same. The regulatory organization offers many internet services. These services encourage professionals to apply for different NPS by PFRDA. They include: Pension Fund account opening through NPSProcessing contributions to the Permanent Retirement Account Number (PRAN).Activating Tier-2 accountUpdating subscribers’ personal informationChanging investment strategyChanging the PFRDA pension arrangementsDownloading and accessing transaction statements through PFRDA NPS loginProcessing withdrawal or departure requestsFiling complaints and queriesPrinting e-PRAN and other documents Conclusion The National Pension Scheme is an initiative by the Government of India. It aims at facilitating a regular income for all subscribers after retirement. The Pension Fund Regulatory and Development Authority (PFRDA) governs the NPS. The PFRDA offers National Pension Scheme through four types of accounts. They are All Citizen Model, Corporate Model, Government Sector, and Subscribers accounts. Featured Posts NPS New Rules 2026: A More Flexible Path to Retirement PlanningA Simple Guide to NPS Registration and Online Account OpeningNPS Vatsalya: Building Financial Security for the Next GenerationPlanning for Retirement with NPS: This Blog Might Be For You!NPS Returns and Retirement Planning: What Every Investor Should Know
Back to Blog Benefits of Joining Corporate National Pension System (NPS) – KFintech June 4, 2022 The National Pension Scheme, introduced by the Government of India in January 2004, aimed to provide pensions to government employees after retirement. Until 2009, the scheme was reserved for government employees only. For non-government employees to enjoy the benefits of the NPS, the NPS Corporate Model was launched in December 2011. Today, the general public in the age group of 18 to 60 years can invest in Tier-1 and Tier-2 accounts of the NPS. The Corporate National Pension Scheme is designed for all corporates, including private companies, CPSEs, PSUs, etc. Employers can offer the scheme to employees, along with the benefits of Gratuity, Provident Fund, Superannuation, or any other pension funds. Similar to Employees Provident Fund (EPF), the corporate model of NPS enables both employees and employers to contribute periodically. To build a corpus that results in retirement benefits for NPS employees, 10% of the employee’s salary is deducted for contribution to the scheme. The employer also makes an equal contribution. Corporate NPS Benefits Easy Adoption An employer can introduce NPS to its employees under the scope of their employee-employer relationship. The scheme can be mandatory or voluntary. Low Cost The administrative costs of NPS are much lesser than other investment options. This is a huge benefit for subscribers. The employer does not need to establish and maintain a Trust or indulge in record-keeping activities regarding the pension for NPS employees. There is also no set-up or maintenance cost. Flexibility There are no fixed rules for NPS employee and employer contributions. The employee or the employer can select a pension fund manager. The employees can decide the proportion in which they would like to invest in debt or equity from the options provided. The employees can also choose to leave the allocation in auto mode, wherein the equity exposure reduces as the age of the subscriber increases. No Obligation The corporate is only a facilitator between the subscriber and the pension fund manager. All responsibilities and obligations to maintain the account are with the employee. Tax Benefit Corporate NPS allows senior employees to claim deductions beyond the limit of ₹1,50,000 under Section 80C of the Income Tax Act. The cost-effective investment option allows exposure to equity as per the employee’s age to build a higher retirement corpus with low fund management charges. Furthermore, Corporate NPS provides triple tax benefits to middle and junior employees. They can opt for equity exposure up to 75%. The scheme is also a systematic investment plan where employees can start investing with only ₹500. There is also an NPS employer contribution tax benefit. Employers can record the amount they contribute to NPS as a Business Expense in their Profit & Loss accounts to claim the benefits. NPS employee death benefits While the purpose of the National Pension Scheme is to provide monetary support to the employee after retirement, it provides certain death benefits too. In the case of the unfortunate demise of the subscriber before retirement, the nominee can withdraw the money accumulated in the corpus. Who Can Join Corporate NPS? Under the Corporate model, all Indian citizens are entitled to apply for the NPS.The age of the subscriber should be between 18 to 60 years on the date of the application.The company you are working with should be registered under the corporate model. EPF Vs. NPS Many argue that the EPF and NPS are similar. However, there are major differences that you must know of to decide which one is more suitable for you. The Employee Provident Fund is a mandatory retirement savings scheme, whereas the Corporate National Pension Scheme is a voluntary retirement savings fund. The employee’s contribution to EPF is eligible for tax benefits of up to ₹1,50,000 under Section 80C of the Income Tax Act. On the other hand, the NPS Corporate Model permits employees to claim deductions of ₹50,000 under Section 80CCD (1B) after exhausting the ₹1.5 lakh limit. Which Companies Can Offer Corporate NPS to Their Employees? A company must be registered under the Companies Act, 2013, to offer NPS employee retirement benefits. Registered co-operative societies can also make contributions to the employees’ NPS. The corporate model is available for government and affiliated organizations apart from public sector companies. Moreover, proprietary concerns, registered partnership firms, and some foreign companies can also benefit from the NPS corporate model. Summing Up The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a separate model of pension schemes for employers. It is available for corporate entities, public sector undertakings, central public sector enterprises, etc. The model, known as the NPS Corporate Model, enables corporates to adopt NPS as a retirement benefits scheme for the employees. Featured Posts NPS New Rules 2026: A More Flexible Path to Retirement PlanningA Simple Guide to NPS Registration and Online Account OpeningNPS Vatsalya: Building Financial Security for the Next GenerationPlanning for Retirement with NPS: This Blog Might Be For You!NPS Returns and Retirement Planning: What Every Investor Should Know
Back to Blog Are NPS Returns and Maturity Amount Taxable? June 3, 2022 The National Pension System or NPS is a voluntary retirement planning scheme available for the citizens of India. This scheme was launched by the Government of India in January 2004 to help Government employees create a corpus for their retirement. However, in 2009, the NPS scheme was opened to all sections. You can invest in the NPS to create a corpus and ensure a regular stream of income after your retirement. You can also receive certain tax benefits under Section 80C of the Income Tax Act of 1961 by investing in NPS. But many people are sceptical about the tax exemptions available on the NPS investments and returns. In this article, we will discuss in detail the NPS, the expected rate of return on NPS investments, and whether NPS returns on maturity are taxable or not. Let’s get started with what NPS is first. What is NPS? As mentioned, NPS is a government-backed retirement planning tool in which you can invest your money to create a corpus for your retirement. It is a market-linked investment instrument, and that is why your money invested in NPS gets invested in a combination of debt and equity. A professional pension fund manager manages the money invested in the NPS. As an investor, you can choose between the Auto Mode and Active Mode. When you choose the Active Mode, you have the freedom to manage your investments on your own by switching between debt and equity. However, if you choose the Auto mode, your pension fund manager automatically switches between securities to ensure maximum returns on your investments. As per the current NPS rules, you can start investing in NPS by contributing at least ₹6000 every financial year (minimum ₹500 per contribution) till its maturity, i.e., your retirement age. At the time of maturity, you can withdraw up to 60% of the accumulated corpus, and the remaining amount will be used to provide you with a regular monthly income after your retirement. When you invest in NPS, you have the flexibility to choose between seven pension fund managers and a Tier I or Tier II scheme. Depending upon the type of scheme and fund manager chosen by you, your NPS return rate may vary between 9 to 12 percent. You can use our online NPS return calculator to determine approximate long-term returns on your NPS investments. Types of NPS Accounts There are two types of NPS accounts – Tier I NPS account and Tier II NPS account. While a Tier I account is mandatory if you want to invest in NPS, Tier II is a voluntary savings account where you can park your money just like a savings bank account. Unlike a Tier I account,a Tier II account offers you more flexibility in terms of withdrawal. While a Tier I account comes with a minimum lock-in period of three years, a Tier II account has no such provisions. You can invest and withdraw your money from a Tier II account anytime without any restrictions. NPS Tier II return calculator works in the same way as it does for NPS Tier I account. Tax Provisions on NPS Returns By investing in an NPS Tier I account, you can claim tax deductions of up to ₹2 lakh every financial year under various sub-sections of Section 80C of the Income Tax Act. However, no tax benefits are available forNPS Tier II accounts since they act as only a savings scheme and don’t necessarily help in retirement planning. Now, let’s talk about whether NPS returns on maturity are taxable or not. Since NPS qualifies under the Exempt-Exempt-Exempt (EEE) category investment plan, its returns are tax-free for investors. To qualify for the EEE category, an investment instrument must fulfil these conditions: The amount of the investment should be available for tax deductionsThe income earned from the investment should be exempted from income taxNo tax should be applicable on maturity proceeds However, there is a little catch. As per existing NPS rules, up to 60% of the accumulated corpus can be withdrawn at maturity. The remaining amount is used to invest in annuities to provide you with a regular stream of income after your retirement. While no tax is applicable on the withdrawal of money upon maturity, money received as an annuity after your retirement is added to your taxable income. For example, if the total accumulated corpus at maturity is ₹10 lakhs, you can withdraw up to 60%, i.e., ₹6 lakhs as non-taxable income. The remaining 40%, i.e., ₹4 lakhs, would be used to provide you annuity income, which could attract income tax. To Conclude NPS is a useful retirement planning tool. You can invest in it to get healthy returns. NPS rate of return is usually higher than most fixed-income instruments, such as Fixed Deposit and Public Provident Fund (PPF). Since NPS qualifies as an EEE-category investment instrument, the investments made in it, along with the maturity benefits, are non-taxable. To know how NPS can help you build your retirement, click here. Featured Posts NPS New Rules 2026: A More Flexible Path to Retirement PlanningA Simple Guide to NPS Registration and Online Account OpeningNPS Vatsalya: Building Financial Security for the Next GenerationPlanning for Retirement with NPS: This Blog Might Be For You!NPS Returns and Retirement Planning: What Every Investor Should Know
Back to Blog How Does NPS Work for Government Employees? June 2, 2022 The National Pension Scheme (NPS) is one of India’s most popular retirement benefit plans. The Pension Fund Regulatory and Development Authority of India (PFRDA) is responsible for regulating the NPS scheme. Investing in this plan secures your retirement while offering tax benefits under Sections 80C and 80CCD. There is also a lock-in period with the NPS, but withdrawal is permittedunder certain circumstances. The NPS rules and regulations for government and non-government employees differ significantly. Here is everything you need to know about NPS if you work for the government. NPS Account Opening Online Rule If you are a Central Government employee, NPS is mandatory for you if you joined the service on or after 1st April 2004. However, this condition does not apply to you if you work under the armed forces. NPS is also mandatory for State Government employees (except those employed under the West Bengal government). As soon as you join the service, your employer wants you to submit an NPS application form to the Pay and Accounts Officer (PAO) and Drawing and Disbursing Officer (DDO). The enrolmentis then processed through the nodal officer. NPS Contribution for State Government Employees and Central Government Government employees can contribute to online NPS at the rate of 10% of the salary plus dearness allowance. The employer will make a matching contribution in this case. However, the employer contributions rates have been revised and increased to 14%. The rate revision was made effective from 1st April 2019. Benefits of NPS for Central Government Employees: Higher returns: The salary you contribute towards NPS is invested in equity, alternative investment funds, corporate bonds, and government securities. It provides safer and better returns than any other scheme available due to the diversification of money in different asset types. The NPS interest rate can range between 9% and 12%. Tax benefits: NPS allows you to claim tax advantage under section 80C of the Income Tax Act. You can claim tax exemptions of up to ₹1.5 lakhin a financial year. NPS Withdrawal Rules: Premature exit before the age of 60 years: If your accumulated corpus is equal to or less than ₹2.5 lakh, you will be provided with a lump sum payment. If you have an accumulated corpus of more than ₹2.5 lakh, you must invest at least 80% of it in an annuity plan. The remaining 20% will be paid in one single sum to you. Normal exit after the age of 60 years: You are allowed to withdraw the lump sum amount if the accumulated corpus is less than or equal to ₹5 lakhs. In case the corpus is over ₹5 lakhs, you must invest at least 40% of it in an annuity plan. The remaining 60% will be paid as a lump sum. To Sum It Up NPS is mandatory for all government employees. In case you work in the private sector, you can also start contributing to NPS and enjoy the benefits of relatively safer returns. Featured Posts NPS New Rules 2026: A More Flexible Path to Retirement PlanningA Simple Guide to NPS Registration and Online Account OpeningNPS Vatsalya: Building Financial Security for the Next GenerationPlanning for Retirement with NPS: This Blog Might Be For You!NPS Returns and Retirement Planning: What Every Investor Should Know