Showing posts with label new pension scheme india. Show all posts
Showing posts with label new pension scheme india. Show all posts

Wednesday, November 11, 2015

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Five things you should know about NPS before investing

Before you pour money into the New Pension System, know the tax benefits offered by the scheme and the tax treatment of the income.

1. Tax benefits

There are three ways to claim tax deduction by investing in the NPS. Firstly, contributions of up to Rs 1.5 lakh a year are eligible for tax deduction. If your employer has introduced NPS or you invest in the NPS on your own, the amount you contribute to the scheme will be eligible for deduction under Sec 80CCD(1). This deduction comes under the overall deduction available under Sec 80CCE. Secondly, a further deduction is available under Sec 80CCD(2). Under this, if your employer puts up to 10 per cent of your basic salary in the NPS, that amount will be eligible for tax deduction. If your basic salary is Rs 3 lakh a year (Rs 25,000 per month), you can avail an additional deduction of Rs 30,000 (10 per cent of Rs 3 lakh). From this year, another additional deduction of up to Rs 50,000 is available under the new Sec 80CCD(1b). Any taxpayer who invests up to Rs 50,000 in the NPS can avail of this deduction, over and above the Rs 1.5 lakh saved under Section 80C.

2. Annuitisation on maturity

NPS investments mature when the investor turns 60. If the corpus is less than Rs 2 lakh, the entire sum can be withdrawn. If it is more, the subscriber must put at least 40 per cent of the corpus into an annuity to get a monthly pension. The investor can choose any annuity option as well as the annuity provider. Till recently, the annuity had to be purchased as soon as the subscriber turned 60. But under the new rules, the investor can wait for up to three years to withdraw the corpus. This flexibility is important because if the investor has some portion of his corpus in stocks and the markets are down when he turns 60, he has the option to wait till the markets recover.

3. Taxation of corpus

The maturity corpus is tax free for government employees but private sector subscribers have to pay some tax. If the individual has not received gratuity, up to 50 per cent of the total corpus received as commuted pension will be tax free. But if he has received gratuity, only 33 per cent of the corpus will be tax free. If your NPS corpus is Rs 1 crore, 40 per cent of this (or Rs 40 lakh) will go into buying an annuity. If you do not get gratuity, 50 per cent of the corpus (or Rs 50 lakh) will be tax free. The remaining Rs 10 lakh will be taxed as income at the normal rate applicable to you. Savvy investors can minimise the tax by staggering the withdrawals over 2-3 years.

4. Withdrawal rules

NPS is a pension product and therefore, premature withdrawals before 60 were not allowed. Under the new rules, a subscriber who has contributed for at least 10 years will be allowed to withdraw up to 25 per cent of the contribution for specific purposes, including children's higher education or marriage, construction or purchase of first house and medical treatment of self, spouse, children or dependent parents. The medical treatment is only for 13 critical illnesses and life threatening injuries sustained in an accident. An investor can withdraw three times during his tenure in the scheme but there should be a gap of at least five years between each withdrawal. However, this gap will not apply in case the withdrawal is for a medical treatment. Also, the curbs on withdrawals are only for tier I accounts. Investments in a tier II account, which can be opened only if you have a tier I account, can be withdrawn any time.

5. Investment rules

Unlike the PPF, there is no ceiling on the amount one can invest in the NPS. However, there is a minimum Rs 6,000 that a subscriber must contribute in a year. There is also a 50 per cent ceiling on the allocation to equities. Till recently, the equity portion of NPS funds for private sector employees was invested in Nifty stocks in the same proportion as their weight in the index. But now fund managers have been allowed to invest in a wider universe of stocks. They are also no longer required to mirror the index but are free to invest as per their reading of a stock's potential. Investors can choose from any of the seven pension fund managers but can switch only once in a year.


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‘Scrap new pension scheme’-Retired employees

Members of the Tamil Nadu Government All Department Retired Employees Association, Vellore taluk, have demanded withdrawal of the New Pension Scheme for government employees as it had zero benefits. Staging a demonstration on Thursday, the association members said persons who had joined government service after 2003 were covered under the new pension scheme.

“According to the scheme, an amount deducted from the salary and the government’s equal share is deposited in mutual fund. Since 2003, Rs. 6,000 crore has been deducted from salaries but not invested in any mutual fund. The scheme has no benefits and should be scrapped,” N. Krishnamurthy, president of the association’s Vellore Taluk unit said. He said that about two lakh posts were lying vacant in various posts across all departments in the State government and demanded that they be filled up.

The association wanted the government to grant medical allowance of Rs. 1,000 every month. Persons who have retired from the nutritious meal scheme, anganwadi, village revenue posts, local body assistants and forest guards should be granted the minimum basic pension of Rs. 3,050.

Senior citizens should be provided with free bus passes. Like the Central government, the State government too should include the grade pay in the pension for those who retired prior to January 1, 2006. The health insurance scheme amount should be increased to Rs. 4,00,000, the association demanded.


Friday, November 23, 2012

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Implementation of NPS

The New Pension System (NPS) has been implemented for various sectors like Central Government, State Government, Private Sector and NPS-Life.  The status of NPS in these sectors as on 10th November, 2012 is as under:-

No. of Subscribers
 (Figures in lakhs) 
 Assets under Management (Rs. In crores)
 Central Government

 10.62  14,846
 State Government



 Private Sector









The number of subscribers is increasing every year in all the sectors.

There is no proposal to increase the monthly contribution of subscribers by the Government.  The Government provides matching contribution for the Central Government employees who are covered under the NPS scheme.  In case of NPS Swavalamban accounts, Rs. 1000/- per annum is being contributed by the Government.

NPS Trust consisting of professionals with expertise in the field of Investment and Asset Management has been constituted.  The NPS Trust regularly monitors the performance of the Pension Funder Managers (PFMs) appointed by Pension Fund Regulatory & Development Authority (PFRDA).  PFMs manage the investments of subscribers of NPS in conformity with the Investment Management guidelines prescribed by the NPS Trust.

             This information was given by the Minister of State for Finance, Shri   Namo Narain   Meena in written reply to a question in Lok  Sabha today.