Back to Blog Understanding Tier I and Tier II NPS Accounts March 17, 2023 India’s National Pension System is synonymous with retirement planning and investing. Earlier, NPS was open to only central government employees, but in 2009, it was opened to all citizens of India including private sector employees. Run by the Pension Fund Regulatory and Development Authority (PFRDA), under the jurisdiction of the Ministry of Finance, NPS enables Indian citizens to contribute towards their pension fund, to be withdrawn when their account matures or under other specific circumstances. Accounts in NPS To learn more about how NPS works, read this blog. The National Pension Scheme provides its subscribers with two types of accounts primarily referred to as Tier I account and Tier II account. It is mandatory for subscribers to join NPS through a Tier I account, whereas opening a Tier II account is optional and can be done at any time, whether it be at the time of opening the Tier I account or later. The Tier-I/Pension Account is a permanent retirement account that requires subscribers to invest for the long term, and in return, they receive a pension at the time of retirement. Meanwhile, the Tier-II or Investment Account is a voluntary short-term investment account. Tier I vs Tier II Below are some key differences between Tier I and Tier II NPS accounts: Tier ITier IIStatusMandatoryVoluntaryWithdrawalsRestrictedPermittedMin Initial Contribution₹ 500₹ 1000Min Subsequent Contribution₹ 500₹ 250Max NPS ContributionNo LimitNo Limit Registering for NPS and opening an account will enable you to open a Tier I, since that is the default choice for new investors. Why? Because you need to have a Tier I account in order to open a Tier II account. How to open a Tier II account? Once you have registered for a Tier I account, here is how you can go about opening a Tier II account: You should have a ‘Permanent Account Number’ (PAN).You can then enter details like PRAN, Date of Birth and PAN.OTP for the purpose of authentication will be sent to the mobile number registered with the CRA.You then need to fill up all the mandatory details (Bank, Nomination, Scheme Preference etc.) online.Upload copy of PAN Card and cancelled cheque.You need to enter the initial amount for investment (minimum ₹ 1000).You will then be routed to a payment gateway for making the payment towards your NPS account from Debit/ Credit card or Internet Banking.You will need to take a printout of the form after activation of Tier II account.The form along with copy of PAN card and cancelled cheque should be sent within 30 days from the date of activation of Tier II account to KFintech branch office or else the PRAN (Tier II) will be ‘frozen’ temporarily. Conclusion To learn more about you can plan your retirement with NPS and open an account, visit our dedicated NPS platform. 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 make retirement a part of your financial plan? March 13, 2023 Many people tend to overlook retirement planning in the overall financial plan that they make for themselves, until it’s too late. The truth is that the earlier you start planning for retirement, the better off you’ll be in the long run. One of the most popular investment vehicles for retirement planning is, of course, the government-run National Pension System. The NPS pension scheme that allows individuals to invest and save for their retirement years. It’s open to all citizens of India between the ages of 18 and 60. Contributions can be made on a regular basis (such as monthly or annually) up until the age of 60. In this blog, we’ll walk you through the steps of how to include retirement planning in your financial plan, and secure your life after you retire from work, by letting your money work for you! Determine Your Retirement Goals There is no retirement planning without determining your retirement goals. For that, you need to ask yourselves some pretty pointed questions! How much money do you want to have saved up by the time you retire?What kind of lifestyle do you want to live during retirement?Do you plan on travelling or buying a second home?Once you have the answers to these questions, you can start working towards them. Calculate Your Retirement Needs After you have determined your retirement goals, you need to do some serious calculations about how much money you will need to save to achieve those goals Remember to factor these in when you crunch the number: Current ageRetirement ageLife expectancyExpected retirement expenses. You can also use online retirement calculators or take a financial advisor’s help to calculate your retirement needs. Determine Your Retirement Income Sources Next, you need to figure out where the money that will secure your retirement will come from. This is where the National Pension System, and other long-term investment vehicles will come into play. It’s essential to know how much income you will have during retirement, so you can plan accordingly and ensure that you have enough money to cover your expenses to live a comfortable life, free of financial stress. Keep Reviewing Your Plan Every Year We can’t stress enough how important it is to review and adjust your retirement plan regularly. People change, you will change with them, and your life and retirement goals might also change as you grow older. So you need to make sure that your retirement plan is flexible enough to adapt to those changes. We recommend that you review your retirement plan once a year, at least, and make changes to it accordingly. Ready? Get started with opening a NPS account or you want to learn more about it, you can visit 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 Is the National Pension System ideal for Millennials? February 17, 2023 Are you tired of feeling unsure about your financial future? It’s time to take control and start planning for a secure retirement. And that’s where India’s National Pension System (NPS) comes in! I know, the thought of saving for retirement may seem far off in the distant future. But trust me, it’ll be here before you know it. And the earlier you start, the better off you’ll be. Why NPS? So, why should you consider investing in the NPS? Here are a few reasons: Affordability NPS has a low entry barrier and low contribution requirements, making it an attractive option for millennials who are just starting out in their careers and have limited disposable income. You can start with a minimum contribution of Rs. 500 per annum. Tax Benefits You can invest in NPS and claim up to 1.5 lakh deduction under 80C. Voluntary contributions of up to ₹50,000 to NPS Tier I account are deductible under 80CCD (1B). If you are a corporate model subscriber, you can have up to 10% of your basic salary contributed to your NPS account and claim up to ₹7.5 lakh in deductions under 80CCD (2). Additionally, NPS comes under EEE category. Exempt for deposits, exempt for returns, and exempt for withdrawal. Flexibility NPS offers a range of investment options including equity, debt, and government securities. You can choose the investment mix that aligns with your risk tolerance and financial goals. Furthermore, you have the option to switch between investment options at any time. Government Backed The NPS is backed by the Government of India, making it a reliable and secure investment option. Your investment is protected and managed by the Pension Fund Regulatory and Development Authority (PFRDA), ensuring the safety of your funds. Long-term Savings NPS is designed for long-term savings, with a minimum investment period of 10 years. By starting early and making regular contributions, you can accumulate a significant corpus by the time you retire. Portability With NPS, you can take your savings with you wherever you go. You can transfer your NPS account from one city to another or from one job to another, making it an ideal option for millennials who are likely to change jobs and locations throughout their careers. Conclusion So, what are you waiting for? It’s never too early to start planning for your future. By investing in the NPS, you can take control of your financial future and ensure a secure retirement. Start today and be one step closer to a worry-free tomorrow! 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 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 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