NPS or national pension scheme: After retirement, the subscriber can withdraw 60 per cent on the amount as lump sum and rest has to be converted into annuity.
NPS or National Pension System is a voluntary retirement savings scheme that enables the subscriber to accumulate savings during his or her working life and earn a pension thereafter. This pension scheme offers an opportunity to subscribers to accumulate savings during their working years and draw a pension after the age of 60 years. Rs. 6,000 is the minimum amount that has to be deposited by the subscriber in a year while there is no maximum limit. NPS offers two types of accounts: Tier I and Tier II. The Tier 1 account is non-withdrawable till the person reaches the age of 60 years. After retirement, the subscriber can withdraw 60 per cent on the amount as lump sum and rest has to be converted into annuity.
Under NPS, partial withdrawal before that is allowed in specific cases. On the other hand, the Tier II NPS account is just like a savings account and subscribers are free to withdraw the money as and whenever they require.
NPS – Five Things You Need To Know
1) Those who want to open an NPS account now have more choices. Post offices are now offering the facility. This was communicated by the Department of Post in a post on microblogging site Twitter. “Now all eligible citizens can open their National Pension System Account with India Post and avail the benefits and services,” it said.
2) To increase the pension coverage, the maximum age of joining under NPS-Private Sector (i.e. All Citizen and Corporate Model) has been increased from 60 years to 65 years. Now, any Indian Citizen, resident or non-resident, between the age of 60 and 65 years can also join NPS and continue up to the age of 70 years in NPS.
3) In Budget 2017, the government had announced changes in NPS rules to make the scheme more attractive. For self-employed professionals, investment up to 20 per cent of gross annual income is deductible from taxable income, subject to a limit of Rs. 1.5 lakh.
4) NPS allows partial withdrawals for specific purposes before the subscriber reaches the age of 60 years. Withdrawal of 25 per cent of the contribution made by a subscriber has been exempted from income tax, according to Budget 2017.
5) NPS Account Opening Online: To make the NPS account opening process convenient, the National Pension System Trust has introduced a online facility called ‘eNPS’. The eNPS facility of National Pension System Trust allows opening of individual pension accounts under NPS and making initial and subsequent contribution to Tier I and Tier II accounts.