National Pension System (NPS) is one of the most common tools for monetary preparing in India. It is a defined contribution scheme regulated by PFRDA. Initially, the scheme was launched for Government personnel joining services on or following January 1, 2004, but subsequently extended to all citizens of India with an choice of joining on a voluntary basis.
NPS subscribers are allotted a 12-digit special Permanent Retirement Account Number (PRAN) beneath which all activities of the subscriber are recorded. PRAN can be ported from one employer to one more.
Under NPS, subscribers are permitted to contribute to the fund more than their working life. On exit, they are permitted to withdraw a particular percentage of the corpus as a lump sum and get an annuity with the remaining quantity to get a normal revenue in retirement years.
How significantly you can withdraw?
As per the NPS guidelines, 60 % of the corpus can be withdrawn on retirement. No tax will be levied on this withdrawn quantity. The subscriber is essential to get an annuity with the remaining 40 % of the corpus.
Recently, the Pension Fund Regulatory and Development Authority (PFRDA) permitted subscribers to withdraw the complete quantity if the total worth of their corpus is up to up to Rs 5 lakh.
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PFRDA’s choice to let the complete withdrawal is anticipated to advantage a section of the government sector and private sector subscribers who joined NPS late in their lives. The maximum entry age of NPS has also been improved to 70 years, whilst subscribers have been offered with the choice of deferring their account up to the age of 75 years.
Main retirement automobile
Experts recommend that subscribers can use NPS as their primary retirement automobile.
“National Pension System (NPS) is a government-initiated product with the sole objective of making retired persons financially self-dependent. It is one of the worlds cheapest products and at the same time, giving reasonably good returns. Further, as the subscriber is required to invest at least 40% of the accumulated wealth in buying annuity, the subscriber has assured pension monthly,” Sreekanth Nadella, CEO, KFin Technologies, told FE Online.
Earlier, complete withdrawal was permitted only when the NPS corpus of the subscriber was up to Rs 2 lakh.