NPS

What is National Pension Scheme (NPS)?

The National Pension Scheme is a federal retirement aide drive by the Central Government. This benefits program is available to workers from the general population, private and, even the unorganized sectors with the exception of those from the military.

The plan urges individuals to put resources into a benefits account at ordinary stretches over the span of their employment. After retirement, the investor can take out a specific level of the corpus. As a NPS account holder, you will get the leftover sum as a month to month pension post your retirement.

Prior, the NPS covered just the Central Government workers. Presently, nonetheless, the PFRDA has made it open to all Indian residents.

NPS conspire holds monstrous incentive for any individual who works in the private area and requires pension after retirement. The scheme is portable across jobs and locations, with tax benefits under Section 80C and Section 80CCD.

Withdrawal Rules After 60

In opposition to normal conviction, you can't pull out the whole corpus of the NPS  after your retirement. You are mandatorily expected to keep to the side somewhere around 40% of the corpus to get a normal annuity from a PFRDA-registered insurance firm.

The excess 60% is tax-exempt at this point. The most recent update from the public authority says that the whole NPS withdrawal corpus is exempt from tax.

Early Withdrawal and Exit rules

As an pension scheme, you must keep contributing until the age of 60. In any case, assuming you have been contributing for something like three years, you might pull out up to 25% for specific purposes.

These incorporate kids' wedding or higher examinations, building/purchasing a house or clinical treatment of self/family, among others. You can make a withdrawal up to 3 times (with a gap of five years) during the tenure.

These limitations are just forced on tier I accounts and not on tier II accounts.

Types of NPS Account

he two primary account types under the NPS are tier I and tier II. The former is the default account while the latter is a voluntary addition. The table below explains the two account types in detail.


Particulars
NPS Tier-I Account
NPS Tier-II Account
  Status
Default
Voluntary
Withdrawals
Not permitted
Permitted
 Tax exemption
Up to Rs 2 lakh p.a.(Under 80C and 80CCD)
1.5 lakh for government employees Other employees-None
Minimum NPS contribution
Rs 500 or Rs 500 or Rs 1,000 p.a.
Rs 250  
 Maximum NPS contribution

No limit

No limit

The Tier-I account is mandatory for everyone who opts for the NPS scheme. The Central Government employees have to contribute 10% of their basic salary. For everyone else, the NPS is a voluntary investment option.

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