NPS Contribution

Contribution refers to the funds deposited by individuals or entities into the National Pension System (NPS) in India. NPS is a government-sponsored pension scheme that aims to provide retirement income to individuals. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) and offers tax benefits to contributors.

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NPS Contributions can be made in two different accounts

Tier I NPS Account : This is the primary NPS account and has certain restrictions on withdrawal until retirement. Contributions made to the Tier I account are eligible for tax deductions under Section 80C of the Income Tax Act.

Tier II NPS Account :This is an optional investment account that provides more flexibility in terms of withdrawal. Unlike the Tier I account, the contributions to the Tier II account do not qualify for tax deductions.

How to Make NPS Contributions?

NPS Contributions can be made through both offline and online modes, depending on the preference of the individual.

NPS Offline Contributions

  1. By Visiting the Nearest PoP-SP

    Visit the nearest Point of Presence (POP) or any authorized bank branch.

    Obtain and fill the NPS contribution form.

    Submit the form along with the contribution amount to the POP or bank representative.

    Collect the acknowledgment receipt as proof of contribution.

  2. Through the Nodal Office

    To make an offline contribution, individuals can visit the nearest Nodal Office authorized by the Pension Fund Regulatory and Development Authority (PFRDA). The Nodal Office provides assistance in filling out the necessary forms and collecting the contribution amount.

    Once the contribution is made, the Nodal Office forwards the amount to the relevant Pension Fund Manager (PFM) for further processing.

NPS Contributions Online

  1. Through CRA Portals

    The PFRDA has designated two Central Record Keeping Agencies (CRAs) to oversee the inflow of funds into the NPS, handle registrations, and perform other tasks such as issuing PRAN. You have the option to contribute to both NPS Tier I and Tier II accounts using either of the CRA systems. Simply choose a CRA, open an account, and receive your PRAN details and password. Once you have these, you can start investing in the NPS.

  2. By Visiting the ePNS Portal

    If NSDL is your CRA, you can also make contributions to NPS using the eNPS portal. When making NPS contributions online through the eNPS portal, you will need to log in with your PRAN and password. Additionally, you may need to provide other information such as your date of birth and captcha. Once logged in, you will be prompted to choose the account type, specify the contribution amount, and make the necessary declarations before proceeding with the payment. The details of your contribution should appear in your NPS account.

  3. Via Mobile Apps

    If you're a subscriber, you can choose to contribute to NPS online using the mobile apps NSDL e-Gov and KFintech CRA. These apps are accessible for both Android and iOS users. After downloading your preferred app, simply log in using your PRAN details and password, and then follow the provided instructions to make your contribution.

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Minimum NPS Contributions

There is no upper limit to contributions. The table below will outline the NPS minimum contribution to each account:

Tier I

  • Minimum contribution while opening account: Rs. 500

  • Minimum contribution per annum: Rs. 1,000

  • Minimum amount per contribution: Rs. 500

  • Minimum frequency of contributions every year: 1

Tier II

  • Minimum contribution while opening account: Rs. 1,000

  • Minimum contribution per annum: NIL

  • Minimum amount per contribution: Rs. 250

  • Minimum frequency of contributions every year: NIL

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NPS Employee Contribution

Under the NPS, both employees and employers can contribute towards the retirement savings of the employee. The employee's contribution is deducted from their salary on a monthly basis and deposited into their NPS account.

  • 80CCD (1) : Up to 10% of salary (basic and dearness allowance) is eligible for tax deduction under this section, up to a maximum of Rs. 1.5 lakhs p.a.

  • 80CCD (2) : Employer contributions to NPS of up to 10% of salary (basic and dearness allowance) can also be claimed as deduction under this section. For government employees, the cap is at 14% of salary.

  • 80CCD (1B) : Self-contribution of up to Rs. 50,000 can be claimed as an NPS tax deduction.

NPS Employer Contribution

Employers, especially those in the corporate sector, may also contribute to their employees' NPS accounts. The employer's contribution is over and above the employee's contribution and is typically a certain percentage of the employee's basic salary and dearness allowance. The employer's contribution qualifies for tax benefits under Section 80CCD(2) of the Income Tax Act.

NRI NPS Contribution

Individuals who are Non-Resident Indians (NRIs) and are 18 years or older can establish and deposit funds into the National Pension System (NPS) using their NRE/NRO bank accounts. Similar to other Indian citizens, NRIs are required to make a minimum contribution of Rs. 500 to the Tier I account. However, NRIs need to contribute a minimum of Rs. 6,000 per year to their NPS accounts. NRIs are entitled to certain tax benefits upon maturity, including a 100% tax-free corpus, tax-free premature withdrawal if the corpus is below Rs. 1,00,000, and tax-free transfer of the corpus to the nominee in the event of the subscriber's premature death.

Persons of Indian Origin (PIOs), Overseas Citizens of India (OCIs), and Overseas Corporate Bodies (OCBs) are not permitted to make contributions to the NPS.

How to Check NPS Contribution Statement

To check your NPS (National Pension Scheme) contribution statement in India, you can follow these steps:

  • Visit the official website of the National Pension System Trust (NPS Trust): https://www.npstrust.org.in/

  • On the homepage, click on the "Contributors" tab in the top menu.

  • From the dropdown menu, select "Contribution Statement."

  • You will be redirected to the CRA (Central Recordkeeping Agency) login page. CRA is responsible for recordkeeping, administration, and customer service for NPS.

  • If you have a registered CRA login, enter your User ID and Password and click on "Login." If you don't have a CRA login, click on the "New Registration" link and follow the instructions to create a new account.

  • Once you log in successfully, you will be able to access your NPS contribution statement.

  • The contribution statement will provide details such as the amount contributed, the date of contribution, the PRAN (Permanent Retirement Account Number), and other relevant information.

It's important to note that the NPS contribution statement is typically available on a quarterly basis. Therefore, you may need to select the appropriate quarter or financial year to view the desired statement.

Charges for NPS Contribution

  1. CRA Charges

    CRA Charges NSDL Karvy
    PRA opening charges for physical PRAN card Rs. 40 Rs. 39.36
    PRA opening charges for ePRAN card with the physical kit Rs. 35 Rs. 39.36
    PRA opening charges for ePRAN card with email kit Rs. 18 Rs. 4
    Annual PRA maintenance costs Rs. 95 Rs. 57.63
    Charge per transaction Rs. 3.75 Rs. 3.36
  2. POP Charges

    POP Charges Private Govt.
    Initial registration and contribution Rs. 200 NIL
    All subsequent transactions 0.25% of the contribution, subject to a min. of Rs. 20 and a max. of Rs. 25,000; NIL
    Non-Financial transaction Rs. 20 NIL
    Persistency 6 months Rs 1000 contribution Rs. 50 per annum NIL
    Contribution through eNPS 0.10% of the contribution, subject to a min. of Rs.10 and a max. of Rs.10,000 NIL

NPS Contribution Form

The NPS contribution form is a document that needs to be filled out when making offline contributions to the NPS. It includes details such as the contributor's personal information, NPS account number, contribution amount, PRAN details, and mode of payment. The form can be obtained from the nearest Point of Presence (POP) or downloaded from the official website of the National Pension System (NPS).

NPS Government Contribution

Although private-sector employees have the choice to participate in the National Pension System (NPS) voluntarily, it is compulsory for all central government employees (excluding the armed forces) to contribute to the NPS. 

Additionally, many state governments also make contributions to the NPS for their employees. Here are the key points regarding the government's contributions to the NPS:

  • The central government will contribute 14% of an employee's salary, which includes the basic salary and dearness allowance (DA), to their NPS account.

  • Employees are required to contribute a minimum of 10% of their salary, including the basic salary and DA, to their NPS accounts.

Benefits of NPS Contributions:

  • Tax Benefits: NPS contributions qualify for tax deductions under Section 80C of the Income Tax Act, up to a specified limit. Additionally, contributions towards the NPS Tier-II account offer tax benefits.

  • Retirement Corpus Accumulation: Regular NPS contributions help accumulate a substantial retirement corpus over time, ensuring financial security during retirement.

  • Flexible Withdrawal Options: NPS offers flexibility in choosing the withdrawal options at the time of retirement, including partial withdrawals and annuity purchase.

  • Professional Fund Management: NPS funds are managed by professional fund managers, increasing the potential for higher returns on your contributions.

Wrapping It Up!

The NPS (National Pension Scheme) contribution plays a significant role in ensuring financial security and stability during retirement. It is a government-backed retirement savings scheme that provides individuals with a structured and systematic way to accumulate funds for their golden years.

FAQ's

  • Who can contribute to NPS?

    Any Indian citizen between the ages of 18 and 65 can contribute to the NPS. This includes salaried employees, self-employed individuals, and non-resident Indians (NRIs) as well.
  • How can I contribute to NPS?

    NPS contributions can be made through various modes such as online payments, direct debit from the bank account, or through registered Points of Presence (PoPs). The contributions can be made regularly or as a lump sum.
  • Is there a minimum and maximum contribution limit for NPS?

    Yes, the minimum contribution amount for NPS is ₹500 per contribution and ₹1,000 per year. There is no maximum limit for contributions, but tax benefits are available only on contributions up to ₹2.5 lakh per financial year.
  • Are there any tax benefits for NPS contributions?

    Yes, NPS contributions are eligible for tax benefits under Section 80CCD(1) of the Income Tax Act. An additional tax benefit is available under Section 80CCD(1B) for contributions up to ₹50,000 per year.
  • Can I change my NPS contribution amount?

    Yes, you can change your NPS contribution amount. The changes can be made once a year during the active choice or twice a year during the auto choice mode.
  • Can I withdraw my NPS contributions before retirement?

    Yes, partial withdrawal of NPS contributions is allowed under certain conditions like specified medical treatment, higher education, purchase of a residential property, etc. However, complete withdrawal is not allowed before the age of 60, except in cases of terminal illness or death.
  • Can I contribute to NPS after the age of 60?

    Yes, you can continue to contribute to NPS even after the age of 60. However, the tax benefits on contributions will not be available.
  • Can I switch between NPS fund managers?

    Yes, NPS provides the flexibility to switch between different fund managers and investment options. You can choose to change your fund manager once a year.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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