National Pension Scheme (NPS) India is a long-term investment plan for retirement. It allows you to systematically invest during your working years and receive pension every month post-retirement. The beneficiary receive a Rs 30,000 monthly pension under the National Pension Scheme.
What Is The National Pension Scheme?
The National Pension Scheme (NPS) is a government-backed retirement savings scheme designed to provide financial security after retirement. National Pension Scheme is open to employees of the public, private and even the unorganized sectors.
The scheme is a tribute to the workers in the Unorganized sectors who contribute around 50% of the nation’s GDP. It encourages people to invest in a pension account at regular intervals during their employment. NPS investment allows the subscribers to choose amongst equities, Govt. bonds, and Corporate bonds.
Benefits Of Investing Through National Pension Scheme
Low Cost: NPS has relatively low fund management charges. Most of the assets are actively managed in-house.
Tax Benefits: You can claim a tax deduction of up to Rs. 50,000 under Section 80C on your annual contributions. Partial withdrawal at retirement also enjoys tax exemption.
Government Support: For Central Government employees, there is an additional yearly contribution of 14% of pay by the employer.
Professional Management: Your money is managed by professional fund managers offering pre-defined investment schemes matching your risk profile and goals.
Lifetime Pension: The NPS guarantees you a regular pension for life post-retirement, ensuring financial security even in old age.
NPS Tier I and Tier II Accounts
NPS account can be opened in Tier I or both Tier I and Tier II. The primary differences between Tier-I and Tier-II accounts are given below:
| Feature | NPS Tier-I | NPS Tier-II |
| Eligibility | All Indian citizens (18–85 years) | Only those with an active Tier-I account |
| Type of Account | Retirement-focused (pension account) | Voluntary savings account |
| Mandatory or optional | Central/state govt. employees (optional for other employer) | No one – completely optional |
| Minimum Contribution | ₹500 per contribution (₹1,000/year minimum) | ₹250 per contribution (no annual minimum) |
| Withdrawals | Restricted till age 60 (partial allowed in specific cases) | Fully flexible – can withdraw anytime |
| Tax Benefits | Under Sec 80C (up to ₹1.5 lakh) + Sec 80CCD(1B) (₹50k extra) | No tax benefit (except govt. employees under 80C with 3-year lock-in) |
| Employer Contribution | Restrictions apply; annuity purchase mandatory | No restrictions |
| Purpose | Long-term retirement savings | Flexible investment/savings |
NPS Eligibility
- The applicant can be a self-employed shop owner or a retail owner or a vyapari.
- The age of the applicant should be between 18 to 40 years
- The annual turnover of the business should not exceed ₹ 1,50,00,000.
Documents Required For National Pension Scheme (NPS)
To open an NPS account, individuals must submit certain documents for KYC compliance and identity verification. Below is a list of the required documents:
Identity Proof (Any one of the following)
- Aadhaar Card
- Passport
- Voter ID Card
- PAN Card
- Driving License
Address Proof (Any one of the following)
- Aadhaar Card
- Utility bills (not older than 3 months)
- Passport
- Ration Card
- Voter ID Card
- Driving License
Age Proof (if not mentioned in identity proof)
- Birth Certificate
- Class 10 Certificate
- Passport
Bank Account Details
- Cancelled cheque for linking the NPS account to your savings account.
Photographs
- Recent passport-size photograph for account opening.
NPS Registration Form
- Properly filled NPS subscriber form as per the instructions provided during the application.
The Govt. of India has provided several tax benefits for investments in NPS on the employer. This scheme is meant for old age protection and social security of Small Scale Traders and Retailers.
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