WHAT IS NPS

As the name suggests NPS –National Pension Scheme, it is a pension scheme which is the government of India initiative to provide pension opportunity to every Indian it was floated in January 2004 for new government recruits. NPS is compulsory for all the central government employees along with some state government employees who joined after January 2004. NPS was made open to all from May 2009 the basic objective of this scheme is to inculcate a habit of saving specifically for retirement. Any resident Indian between the age of 18-60 yrs can open a NPS account. This account is not compulsory for government employees joining before January 2004 but if they wish they can also open an NPS account.

Let us look at the Taxation part of NPS a maximum of 1.5 lakh rupees of investments in NPS can be claimed for Tax reduction under the overall limit of the section ATC an additional 50,000 rupees can be gained for tax reductions under the section 8 ECC d1b. NPS has an easy status that is exemption on investment, exemption on returns on but taxation on redemption .40% of the couples that you get under diamond would be tax free.

Now types of NPS, the first type is:

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  Tier- 1: It is a mandatory account for the NPS subscriber. As far as government employees are concerned they have to contribute 10% of their basic salary plus DA to this NPS account and government makes an equal contribution for other subscribers. They have to open an account with minimum 500 rupees and they have to contribute six thousands rupees each year. If you are a private sector employee you would be asked to choose between NPS and EPF.

  
  


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  Tier-2: This is a non mandatory account for NPS subscribers. This is a type of saving account from which you can make withdrawals anytime no contributions  would be made by the government or employer in this account and no tax exemptions are available for investments into NPS .Through the tier 2 account you would need at least 1000 rupees to open this and then onwards minimum contribution of 250 rupees. Minimum account balance should be 2000 rupees.

  
  

Here to open NPS accounts:

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  PSU Banks

  
  


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  Many private banks

  
  


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  Post offices

  
  

Withdrawal:

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  After 10 years- 25% of contributions can be withdrawn.

  
  


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  3 withdrawals with the gap of 5 years.