By Mohit Mittal
As per a current survey, by 2050, every single fifth Indian will be 60 years old compared to every single 12th at present. There are almost one hundred million men and women aged 60 or more in India today and the quantity will triple by 2050 most of them will be financially insecure in the sunset years if a social safety net does not start off now.
The will need of the hour is a multifold raise in pension coverage to the private sector, for which National Pension technique(NPS) plays a essential part. Just like Central Government workers, Private Sector Employees can also have pension plans with comparable added benefits following their Retirement.
‘National Pension System’ (NPS) was initially introduced for Central Government workers with impact from 1st January 2004. Pension Funds PFRDA has also created NPS offered to all citizens of India, with impact from 1st May 2009 on a voluntary basis.
In pursuance to PFRDA’s commitment to make offered an avenue for saving for old age to all sections of society, PFRDA launched a separate model to provide NPS to the workers of corporate entities, like PSUs in December 2011. This model is titled ‘NPS – Corporate Sector Model’.
A compact adjust in the Salary Structure can advantage workers in saving more tax more than & above section 80C limit of Rs 1.50 Lakh and Rs. 50,000 beneath section 80CCD 1(B) of Income Tax Act, 1961.
The workers of the corporate entity, enrolled by the employer involving the age of 18-65 years and complying with the KYC norms, are eligible to be registered as subscribers beneath NPS.
NPS enjoys EEE status, withdrawal at the time of Exit is totally tax no cost, which tends to make it more desirable amongst other investment merchandise.
Corporate Sector model is offered to any of the entities beneath:
- Entities registered beneath Companies Act
- Entities registered beneath different Co-operative Acts
- Central Public-Sector Enterprises
- State Public Sector Enterprises
- Registered Partnership firm
- Registered Limited Liability Partnership (LLPs)
- Anybody incorporated beneath any act of Parliament or State legislature or by order of Central / State Government
- Proprietorship Concern
- Trust/Society
Benefits to Corporate Employees
1. Having a pension strategy just like the Government Sector Employees.
2. Flexibility to transfer from One Corporate to yet another corporate without the need of altering PRAN (Permanent Retirement Account Number).
3. Additional Tax Benefits upto 10% of Basic Salary + Dearness Allowance.
4. Transfer of Superannuation Funds to NPS (One Time-Tax Free)
5. Continue to invest in NPS till 70 years of age.
Tax Benefits for Employees
1) Employee can claim up to 10% of gross revenue beneath ceiling of Rs 1.5 lakh beneath section 80CCE
2) Additional Tax deduction advantage of Rs 50000 beneath section 80CCD (1B) more than and above sec 80 CCE of Income Tax Act 1961.
3) In addition, Employee can claim tax advantage beneath section 80CCD (2) on employer’s contribution upto 10% salary (Basic + DA) (no limit) more than & above each the sections 80C & 80CCD(1B)
Tax Benefits for Employers
Contribution upto 10% of standard salary created towards employee account can be deducted as ‘Business expense’ from their profit and loss account u/s 36. The contribution towards NPS will be more than and above the mandatory contribution towards the Employee Provident Fund.
How to Join NPS
Corporates prepared to extend NPS to their Employees will need to tie up with any of the authorized Point of Presence (POPs) beneath NPS.
Point of Presence (POP) is the interface involving the Corporate/Subscribers and the NPS Architecture.
POP will carry out the functions relating to registration of Corporate and subscribers, undertaking KYC verification, processing month-to-month contributions and so forth.
POPs would also provide services to corporate/subscribers for adjust in master information, scheme adjust, POP and PFM Change, exit & Withdrawal and so forth.
( The author is VP & Product Head Investments, Bajaj Capital)