NPS Scheme - National Pension System

The National Pension System (NPS) offers a range of benefits and features that make it a top choice for retirement planning:

• Regulated: Managed under the PFRDA (Pension Fund Regulatory and Development Authority), the NPS is governed by transparent guidelines and regular monitoring by the NPS Trust.
• Voluntary Participation: Available or Open to all Indian residents, citizens between 18 to 70, the NPS scheme provides flexibility in investment amounts and timing according to their financial goals and risk tolerance.
• Flexibility: Choose or change your Point of Presence (POP), investment pattern, and fund manager to optimise returns.
• Cost-effective: Offering one of the lowest fees among other investment options, the NPS ensures economical long-term savings.
• Portability: Your National Pension System account and PRAN remain unchanged, even with job changes or relocations.
• Superannuation Fund Transfer: Allows tax-free transfer of superannuation funds to your NPS pension system account, subject to approvals.
• Tax Advantages: Triple tax benefits make the NPS a smart choice for reducing taxable income. NPS Scheme helps salaried employees individuals and self-employed individuals reduce their taxable income significantly;
  • Section 80CCD (1): Claim up to 10% of basic salary + dearness allowance for employees; and up to 20% of gross annual income for self-employed people, both subject to a maximum limit of Rs. 1,50,000 under section 80C.
  • Section 80CCD (1B): Enjoy additional tax deductions worth up to Rs. 50,000 beyond the limits set by section 80C.

When planning your investments with the NPS scheme, you can choose between:

Active Choice:

•  Offers the freedom to customise your portfolio across four asset classes: Equity (E), Corporate Bonds (C), Government Securities (G), and Alternate Assets (A).
•  Ideal for those investors confident about market movements, managing risk, and willing to assume the responsibility of balancing their portfolios.
• You decide how much to allocate to each class based on risk tolerance and potential return: Equity (E) offers high returns with high risk, Government Securities (G) are low risk, and Alternate Assets (A) are highly volatile with a 5% cap.

Auto Choice (Life Cycle Fund):

•  Suitable for those hesitant or unfamiliar with actively designing their portfolios.
• Allocation adjusts automatically based on age: higher equity exposure in younger years, reducing as you age to lower risk.
•  Three options are available: LC 75 (75% maximum equity exposure), LC 50 (moderate exposure), and LC 25 (conservative exposure) based on your risk tolerance.

An NPS account can be opened with ease through ICICI Bank's simplified online facilities. Here are the two ways how to open NPS account online with ICICI Bank:

NPS Account with iMobile App:

To open your NPS account with ICICI Bank, follow the steps below:

•  Log in to the ICICI Bank iMobile Pay app.
• Click the "Invest" section.
•  Find the “NPS” feature.
•  Fill in all the required details such as your investment amount, personal information, and nominee details.
• Now, upload your photo and signature.
• After verifying the information, submit your application through the app.

NPS Account with ICICI Bank Net Banking:

Here’s how you can open an NPS account online through Net Banking facility of ICICI Bank:

•  Log in to the ICICI Bank Net Banking.
• Find the section, “Investments and Insurance”.
• Next click “National Pension System”.
•  Fill your investment amount, personal information, and nominee details.
•  Next, upload your photo and signature.
•  Confirm the details and click “Submit”.

Please note: Your first contribution to the NPS account must be made online within 45 days of PRAN generation to avoid account freezing.

If you are looking for NPS account opening online eligibility conditions, read these criteria below:

1. You must be an Indian citizen (resident, non-resident, or OCI)

2. Your age must be between 18 and 70 years at the time of NPS application.

3. You must comply with all KYC requirements by submitting documents on the Subscriber Registration Form.

4. NPS is an individual pension account and cannot be opened on behalf of others; Hindu Undivided Families (HUF) and Persons of Indian Origin are not eligible.

For NPS account opening, the Tier 1 account requires a minimum contribution of ₹ 500, while the Tier 2 account requires ₹ 1000.

The NPS tax benefit makes it an attractive choice for both salaried and self-employed individuals who wish to grow their retirement savings. Here’s how -

Tax Benefits for Salaried Employees

• Section 80CCD(1) - You can avail yourself of a tax deduction of a maximum of 10% of your salary and an allowance subject to a limit of Rs. 1.5 lakh.
• Section 80CCD(1B) - In addition to that benefit is a deduction of Rs. 50,000 on top of the Rs. 1,50,000 limit in Section 80CCDB (I).
• Section 80CCD(2) - In case your employer makes contributions to your NPS account also qualifies for a deduction beyond the limit of Rs. 1.5 lakh.

Tax Benefits for Self-Employed Individuals

• Section 80CCD(1B) - You can claim up to Rs. 50,000 plus 20% of your gross income as a deduction, up to a Rs. 1.5 lakh limit.
•  Section 80CCD(2) - Any contributions you or your employer made to NPS also qualify for deductions.

Additional Perks

NPS enables you to access a tax withdrawal of up to 60% of your retirement funds and enjoy savings benefits while offering flexible contribution options suitable for both employees and self employed individuals alike. Additionally providing advantages such as management fees for funds and the ability to transfer accounts easily along with exposure to equities for returns and the option for partial withdrawals, in case of emergencies ensures a stable financial future during retirement. 

The Corporate NPS model is a variation of the National Pension System established by the Pension Fund Regulatory and Development Authority (PFRDA). It enables companies to offer their employees a defined retirement savings plan that's tax efficient as part of their benefits package. With this program, employers can play a role in securing their employees’ future while also enjoying benefits in terms of retirement savings and tax perks. The Corporate NPS model simplifies the way businesses provide retirement benefits through the employer to worker connection and is becoming increasingly popular for its flexibility and cost efficiency for companies as its valuable financial rewards for employees. 

Key Corporate Benefits of the NPS Model

• Cost effectiveness

A key advantage of the Corporate NPS model is its cost effectiveness, for businesses compared to retirement plans in the market. Unlike pension schemes that come with additional administrative and fund management fees the NPS does not burden companies with such extra costs. This feature makes it a compelling choice for organisations looking to offer retirement benefits while keeping their expenses in check. Opting for NPS allows companies to secure coverage, for their employees without putting pressure on company resources.

• Ease of setup

Establishing the Corporate NPS framework is simple and convenient, without any complications involved in comparison to retirement plans where separate trusts are necessary for overseeing staff donations by companies themselves. The NPS model offers a procedure for including or excluding employees from the system which simplifies the management as your staff evolves over time. This ease enables companies of all sizes, ranging from startups to established corporations to seamlessly introduce and oversee the program with ease.

●      Personalisation

The Corporate NPS model offers a level of customisation to meet the requirements of employers and employees alike. Employers have the flexibility to determine the contribution structure—be it a percentage of the employees pay or an optional participation method. Employees are also empowered to tailor their NPS investments by selecting their contribution amounts and deciding on asset classes like stocks, government bonds, or corporate securities for their investments. This customisation ensures that the strategy aligns with the objectives of both the company and its staff members. 

For Corporates

One major benefit of implementing the Corporate NPS program is the tax advantages it offers to the company. Companies have the option to contribute a maximum of 10% of an employees salary and dearness allowance to NPS. These contributions are entirely exempt from taxes under Section 80CCD (2). This feature not only helps organisations in handling their tax responsibilities but also enables them to offer important retirement benefits to their employees without facing substantial financial strains.

For Employees

Employees also receive tax advantages through NPS as their contributions qualify for tax deductions under sections of the Income Tax Act in India. For example in Section 80CCD(1B) employees can seek a deduction of up to Rs. 50,000 in addition to the existing Rs 1.5 lakh limit under Section 80 C. These deductions enhance the appeal of NPS as a tax investment option for employees by enabling them to lower their income and simultaneously create a robust retirement corpus. 

The National Pension System (NPS) is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) to ensure transparency and efficiency.

• PFRDA promotes old-age income security by overseeing pension funds and protecting subscriber interests.
• The NPS Trust manages the funds and conducts regular audits of Pension Fund Managers to safeguard subscribers.
• Central Recordkeeping Agencies (CRA) like K-Fin Technology and NSDL e-Governance manage subscriber data and provide administrative support.
• ICICI Bank, as a Point of Presence (POP), facilitates NPS subscriber registration, contribution submissions, and withdrawal requests. ICICI Bank serves as the first point of interaction for subscribers in the NPS system.

NPS subscribers can exit the system under three circumstances:

1. On reaching 60 years: Subscribers must use at least 40% of their accumulated pension wealth to purchase an annuity for a monthly pension, with the remaining paid as a lump sum. If the corpus is less than ₹5 lakh, 100% can be withdrawn as a lump sum. Subscribers can defer withdrawals or continue contributions until the age of 75.
2. Before 60 years: If a subscriber exits after 10 years of participation, 80% of the pension wealth must be used for an annuity, with the remaining paid as a lump sum. For a corpus under ₹2.5 lakh, 100% can be withdrawn.
3. Death: Nominees can claim 100% of the pension wealth in a lump sum or continue with NPS after completing the necessary KYC.

Claims are processed by the ICICI Bank with an online option for ease.

Yes, the National Pension System (NPS) is where investors can contribute some amount of money at regular intervals until retirement. After retirement, investors can withdraw this accumulated amount to use for their needs. In this way, the NPS Scheme acts as a good long term investment for your money after retirement.

Here are the steps to follow for logging in to your NPS account online:

1. Visit the NSDL NPS portal (https://enps.nsdl.com/eNPS/NationalPensionSystem.html).
2. Click "Login with PRAN/IPIN".
3. Enter your PRAN and password, then click "Submit" to access your E-NPS account.

For first-time login

1. Click "Reset Password".
2. Enter PRAN, date of birth, new password, confirm password, and captcha.
3. Click "Submit".
4. Enter the OTP received on your registered mobile number to confirm.
5. Login using your PRAN and new password.

• Indian citizens, including residents, NRIs, and OCIs can open an NPS account.
• They must be aged between 18 to 70 years.
• You can open an individual NPS account after KYC compliance.
• HUFs and PIOs are not eligible.