NATIONAL
PENSION SCHEME – GOVERNMENT SCHEME
News:
Changes in National
Pension Scheme by year-end: Official
What's
in the news?
●
The Finance Ministry plans to announce
changes in the National Pension Scheme (NPS) for government employees by the
end of the year.
National Pension Scheme (NPS):
●
The National Pension Scheme (NPS) is a voluntary
retirement savings scheme launched by the Government of India in 2004.
●
It is regulated and administered by the Pension Fund Regulatory and Development
Authority (PFRDA).
●
The primary objective of the NPS is to
provide a pension income to individuals upon their retirement.
Key Features of the NPS:
●
Contributions:
Subscribers make regular contributions to their NPS account during their
working years. These contributions accumulate and grow over time.
● Investment Options:
The NPS offers two investment options: a) Auto
Choice: where the funds are invested based on the subscriber’s age, and b) Active Choice: where the subscriber can
select the asset classes (equity, corporate bonds and government securities)
and the fund manager.
● Portable Account:
The NPS account is portable, allowing subscribers to maintain their account
even if they change jobs or locations.
● Withdrawal Options:
Upon retirement, subscribers have the flexibility to withdraw a portion of
their accumulated corpus as a lump sum and use the remaining amount to purchase
an annuity, which provides a regular pension income.
● Tax Benefits:
NPS offers tax benefits at different stages. Contributions made by subscribers
are eligible for tax deductions
under Section 80C, while withdrawals are
subject to certain tax exemptions.
● Regulated and Transparent:
The NPS is regulated by the PFRDA, ensuring transparency and oversight of the
scheme. It follows strict investment guidelines and has mechanisms in place to
safeguard the interests of subscribers.
●
Wide
Coverage: The NPS is available to all Indian citizens, including salaried employees, self-employed
individuals and non-resident Indians (NRIs).
Changes introduced: Systematic
Withdrawal Plan:
●
NPS subscribers will be allowed to
withdraw 60% of their contributions systematically post-retirement.
● The
current system of one-time withdrawal will be replaced.
● 40%
of the contributions must be in annuity.
● Systematic
withdrawals can be customized by the subscriber based on their needs.
● Withdrawals
can be made in lump sum or on a monthly, quarterly, half-yearly, or annual
basis.
●
This feature is applicable to individuals
aged 60-75.