What is New Pension Scheme? Contribute to get Deductions from Income Tax

New Pension Scheme has been introduced by the Government of India to help the people to get pension after retirement especially working in the unorganized sector.

• NPS has been monitored by Pension Fund Regulatory Development Authority (PFRDA) established by the Government of India

• A citizen of India who completed 18 years of age and maximum of 60 years can join in this scheme except those working in Government sector and those covered under NPS

• NPS returns are market linked and you can choose among various options according to your risk

• There are 6 Pension Fund Managers and 3 different options of Assets Class namely E, C & G

Types of Asset Class

• E – Equity Oriented – Money will be invested in Share Market

• C – Debt oriented other than Government Securities – Money will be invested in Bonds, Debentures

• G – Government Securities – Money will be invested in Government Securities and Treasury bills

You can choose one among the three options and can switch the options from time to time.  Usually it is recommended that those who are at younger age can choose ‘E’ option and switch to ‘C’ in the middle age and opt for ‘G’ when they get older.

Two Types of Accounts

There are two types of Accounts, Tier-1 and Tier-2.  You can open Tier-2 Account only if you opened Tier-1 Account.

	Tier – 1 (Pension Account)	Tier -2 (Savings Account)
Minimum Contribution (per installment)	Rs.500/-	Rs.1000/- at the time of Opening A/c Rs.250/- per installment after that
Minimum Contribution (per annuam)	Rs.6000/- p.a.	Rs.2000/- p.a.
Maximum Contribution	No upper limit	No upper limit
Minimum Installment per annum	At least one	At least one
Maximum Installment per annum	No Limit	No Limit
Withdrawal	Can be withdrawn only after the age of 60 years (only 60% of the total fund value can be withdrawn at the end of the term and 40% of the fund will be annualized)	Can be withdrawn any time during the year

What is PRAN?

Permanent Retirement Account Number (PRAN) will be allotted to each subscriber at the time of opening the account.

Swavalamban Scheme in NPS

The scheme is introduced in Budget 2010-11, to increase the contribution to the fund.  Accordingly, The Government of India will contribute Rs.1000/- p.a. to your account if it is opened in the year 2010-11 and applicable to the accounts opened or to be opened in the years 2011-12, 2012-13, 2013-14.  In order to avail this contribution from the Government you have to contribute minimum of Rs.1000/- and maximum of Rs.12000/- per annum to both the Tier-1 and Tier-2 together.

Who are the Pension Fund Managers?

There are 6 Pension Fund Managers:

• ICICI Prudential Pension Fund Management Company Ltd
• IDFC Pension Fund Management Company Ltd
• Kotak Mahindra Pension Fund Ltd
• Reliance Capital Pension Fund Ltd
• SBI Pension Funds Pvt Ltd
• UTI Retirement Solutions Ltd

Tax Benefits under NPS

• Section 80C – up to Rs.1 lakh contributed to NPS in any Financial Year

• Section 80CCD (2) – 10% of salary is allowed as deduction provided that the contribution made by your employer to NPS

Note: ‘Salary’ includes DA, if it is provided in the terms of employment