National Pension System (NPS)

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The National Pension System (NPS) is a voluntary defined contribution pension system administered and regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Let’s explore its key features:

  1. Eligibility:

    • NPS was initially introduced in 2004 for government employees and later made available to all citizens in 2009.
    • It is open to Indian citizens (including NRIs) between the ages of 18 and 70.

  2. Long-Term Retirement Scheme:

    • NPS is designed as a long-term retirement scheme.
    • It allows individuals to open both Tier I (mandatory) and Tier II (optional) pension accounts.

  3. Contributions:

    • Subscribers can make initial and subsequent contributions to both Tier I and Tier II accounts.
    • The minimum initial contribution is ₹500.
    • Government employees covered under NPS can also open pension accounts through eNPS.

  4. Benefits:

    • Tax Benefits: NPS offers tax benefits under Section 80C and Section 80CCD(1B) of the Income Tax Act.
    • Flexible Investment Options: Subscribers can choose from various investment options such as Equity, Corporate Bonds, and Government Securities.
    • Portability: NPS accounts are portable across jobs and locations.
    • Regular Monitoring: Subscribers can track their investments and performance online.

  5. Withdrawal Rules:

    • On retirement, subscribers can withdraw a portion of the accumulated corpus as a lump sum and use the remaining amount to purchase an annuity.
    • Partial withdrawals are allowed for specific purposes like higher education, marriage, or medical emergencies.
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