NPS: National Pension Scheme Details

What is the National Pension Scheme (NPS)?

The NPS National Pension Scheme is a voluntary, long-term retirement plan designed to enable systematic savings for individuals, particularly after retirement. It refers to a systematic process of keeping your finances secure during old age.

In their active years of employment, subscribers work hard in accumulating capital in their pension account through regular contributions. When the retirement age is attained or at a premature withdrawal under certain conditions, the accumulated corpus is strategically distributed.

• Saving as much as 60% of your retirement benefit can be withdrawn quickly and free of tax. However, if the account has less than 5 Lakh by the time of retirement, the subscriber can still decide whether or not to withdraw it when they retire.
• It is also necessary to ensure that a minimum of 40% of the fund is spent on purchasing an annuity from PFRDA-approved annuity providers. By using this, a person can expect a steady income after retirement, helping them avoid possible money problems.
• Retirees can choose the annuity that suits them best, such as a single-life annuity, an annuity with insurance for a surviving spouse, a plan with possible return of their money or a guaranteed period annuity according to their requirements.

NPS Calculator

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18 Years 59 Years

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5% 15%

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40% 100%

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Expected Return from Pension

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60%

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At the age of 60 Yrs

40%

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What are Eligibility Criteria of NPS National Pension Scheme?

The eligibility criteria for the National Pension Scheme are as follows:

• A citizen of India can only open an NPS account.
• The age of the applicant should be between 18 and 70 years at the time of application.
• The applicant must comply with KYC (Know Your Customer).
• The applicant has to be of the legal capability to enter into a contract under the Indian Contract Act.
• NPS Vatsalya provides an opportunity for joining for people under 18 years' age.
• NPS subscriptions are inapplicable to Overseas Citizens of India (OCI), Persons of Indian Origin (PIOS), and Hindu Undivided Families (HUFS) (except for the Minors under NPS Vatsalya who are also NRI/OCI).

NPS accounts are exclusive to individuals. It is not possible to open the accounts for a third person.

Tax Benefits Under the National Pension Scheme (NPS)

Section 80CCD(1): Individual's Own Contribution

Example:
Priya earns an annual Basic Salary + Dearness Allowance of ₹9,50,000.

10% of ₹9,50,000 is ₹95,000. She can claim ₹95,000 as a deduction under Section 80CCD(1).

However, this ₹95,000 will be counted within the broader ₹1.5 lakh limit under Section 80CCD(1). So, if Priya has already invested ₹1.5 lakh in ELSS, PPF, or other eligible instruments, she won't get additional tax relief for this NPS contribution unless she revises her other investments.

1. Section 80CCD(1B): Additional Deduction for NPS

   Criteria	Details
   Who can claim	All individuals investing in NPS (salaried or self-employed)
   Tax Benefit	Additional deduction of up to ₹50,000
   Limit	This ₹50,000 is over and above the ₹1.5 lakh limit under Section 80CCD(1)

   Example:

   Priya has already exhausted her ₹1.5 lakh limit by investing in EPF and life insurance.

   She can still invest an additional ₹50,000 in NPS and claim it under Section 80CCD(1B).

   This effectively increases her total tax-saving potential to ₹2 lakh, giving her extra relief even after the Section 80C limit is used.

2. Section 80CCD(2): Employer's Contribution

   Criteria	Details
   Who can claim	Salaried employees whose employer contributes to their NPS account
   Tax Benefit	- Up to 10% of salary (Basic + DA) under the old tax regime - Up to 14% under the new tax regime
   Limit	This deduction is over and above the ₹1.5 lakh and ₹50,000 limits from Sections 80CCD(1) and 80CCD(1B)

   Example:

   Priya has a Basic + DA of ₹13,00,000 annually.

   Her employer contributes 10% of that, which is ₹1,30,000, to her NPS account.

   Under Section 80CCD(2), Priya can claim this ₹1,30,000 as a separate deduction.

   If she opts for the new tax regime, and her employer contributes 14%, her claimable deduction rises to ₹1,82,000, adding further tax-saving benefit on top of the personal contribution limits.

Types of National Pension Scheme (NPS) Accounts

There are two types of NPS National Pension Scheme accounts:

• Tier I NPS account: This is a mandatory retirement account. You can withdraw money from your Tier I NPS account only after you reach the age of 60. However, you can make partial withdrawals after the age of 50.
• Tier II NPS account: This is a voluntary savings account. You can withdraw money from your Tier II NPS scheme account anytime.

How to Open an NPS Account?

Below are some of the different methods for NPS Account Opening:

• From Banks. (Points of Presence – PoPs):
  • Several big banks in the country are designated as Points of Presence (PoPs) for the NPS.
  • They enable their clients to open an account either online through their digital channels or physically at their branches.
  • State Bank of India (SBI), HDFC Bank, ICICI Bank, and Kotak Mahindra Bank are some examples of the participating banks.
• Via Online Investment Platforms:
  • There are a few digital investment platforms that offer an easy online operation for opening NPS accounts.
• Through Other Registered Points of Presence (PoPs):
  • The NPS framework incorporates several entities that are registered with the Pension Fund Regulatory and Development Authority (PFRDA) as PoPs.
  • These may include registrars (e.g., NSDL), insurance companies, among others.
  • A detailed list of authorized PoPs is on the official NPS website.
• Offline Process (Visit to PoP Branch):
  • People may visit the closest branch of an authorised Point of Presence (Pop) that can be a bank or another accredited office.
  • The process entails the acquisition of a physical NPS subscriber registration form, filling in all the required fields correctly, and submitting it along with the required KYC (Know Your Customer) documentation.
  • At the stage of registration, there is an initial minimum contribution that needs to be met, and usually it can be paid by cash or cheque.

How to Invest in NPS?

There are two main ways to invest in the NPS National Pension scheme:

1. Online Process

   A. Through the NSDL NPS Portal

   For New Users:

   • Visit the official NSDL NPS portal and choose ‘Login with PRAN/IPIN'.
   • Enter your PRAN, new password, date of birth, and the CAPTCHA. Confirm and click ‘Submit'.
   • An OTP will be sent to your registered mobile number. Enter the OTP to verify and set your new password.
   • Use your PRAN and new password to log into your E-NPS account.

   For Existing Users:

   • Log in to the portal using your PRAN and password.
   • Provide the necessary details to access your account.

   B. Through the KFintech NPS Portal

   For New Users:

   • Navigate to the KFintech NPS portal, click on ‘Login', and select ‘Existing Subscriber'.
   • Choose ‘Reset Password' on the login page.
   • Enter your PRAN, date of birth, and CAPTCHA. Click ‘Submit'.
   • Verify using the OTP sent to your registered mobile number and create a new password.
   • Log in with your updated credentials.

   For Existing Users:

   • Go to the portal and click on ‘Existing Subscriber'.
   • Enter your PRAN, password, and CAPTCHA to log into your account.

2. Offline Process

   • Visit your nearest PoP branch.
   • Collect and fill out a physical NPS subscriber registration form.
   • Submit the form along with your KYC documents.
   • Make the minimum initial contribution in cash or cheque.

How to Log into Your NPS Account for the First Time?

Below are the steps on how to log in to your National Pension Scheme (NPS) account:

• Obtain PRAN: Obtain and secure your 12-digit Permanent Retirement Account Number (PRAN) by uploading your required documents either on the NSDL (National Securities Depository Limited) site or through a physically approved Point of Presence(PoP) service provider.
• Access NSDL CRA Portal: Navigate the official website belonging to the NSDL Central Recordkeeping Agency (CRA).
• Initial Login & Password Setup:
  • Write your PRAN and Date of Birth.
  • Come up with a new password and confirm it.
  • Enter the number shown in the captcha code.
  • Click "Submit".
• IPIN Generation: On a successful submission, a unique Internet Personal Identification Number (IPIN) shall be generated for your account.
• Navigate to eNPS Login: Visit NSDL eNPS (electronic National Pension System) login page.
• Login Credentials: Click on the option to 'Login with PRAN/IPIN'.
• Account Access: On the next page, type in the PRAN and the IPIN that was generated for the sake of logging in securely to your National Pension Scheme account.

How are NPS Returns Calculated?

You can calculate returns on your NPS account by using the NPS calculator. An NPS calculator is a handy online tool that helps individuals estimate their potential pension. Users input their relevant financial information into the calculator, and it generates an estimate of the pension they may receive during retirement through their National Pension Scheme account. These calculators are designed to assist people in planning and making informed decisions about their retirement savings and income.

What Are the Returns on NPS (National Pension Scheme)?

The National Pension Scheme (NPS) offers potentially higher returns compared to fixed-income schemes due to its investment in equities. However, unlike Fixed Deposits or PPF, National Pension Scheme returns are not guaranteed. They depend on the performance of the underlying assets you choose to invest.

Here's how they work:

• Market-linked: Market-linked Pension Plan invests your contributions in a mix of asset classes, including equity, government bonds, and alternative investments. The returns you earn are based on how these assets perform in the market.
• Choice of Pension Fund Managers: The National Pension Fund scheme allows you to choose a Pension Fund Manager (PFM) who invests your contributions as per your chosen asset allocation. Different PFMS may deliver varying returns based on their investment strategies.
• NPS (National Pension Scheme) returns are not guaranteed but have historically offered good returns.
• NPS is a long-term investment, and staying invested for a longer duration can help average out market volatility and potentially earn better returns.

What is the National Pension Scheme Interest Rate?

The NPS interest rate depends on asset performance, making it challenging to predict the retirement return. NPS scheme operates as a market-linked product, allowing investment in diverse assets, including equity, government debt, corporate debt, and alternative assets. Once you finalise the asset mix and choose a fund manager, your funds are allocated to specific schemes within these four asset classes under the new pension scheme.

The NPS scheme provides the flexibility of Tier I and Tier II accounts, with the current interest rates as of 2025:

Tier I: Top-performing equity pension fund managers for Tier I accounts:

Tier II: Top-performing equity pension fund managers for Tier II accounts:

What is the Withdrawal Process Under the National Pension Scheme?

• When one becomes 60 years of age, subscribers are entitled to withdraw 60% of the corpus.
• The rest 40% is up for use through annuity purchase.
• In the case where pension saving is up to ₹5 lakh, the subscribers can choose a lump sum feature withdrawal.

Pre-60 Years Withdrawal:

• By the time one attains the age of superannuation or 60 years, at least 80% of the corpus accrued in the pension by the subscriber should be used to procure an Annuity for a regular monthly income.
• If the total corpus is not more than ₹2.5 lakhs, then a 100% lump sum withdrawal option is available for the subscriber.

Death of Subscriber:

• The entire corpus is conveyed to the beneficiary/ legal heirs.
• Required documents:
  • Beneficiary's ID
  • Death certificate, etc.

Types of Withdrawal Forms Available Under the NPS scheme

Below is a breakdown of the withdrawal forms available under the NPS scheme, categorized by the reason for withdrawal:

1. NPS Scheme Withdrawal Forms on Superannuation

   Form	Applicable For
   Form 101 GS	For government retirees' withdrawals.
   Form 301	For corporate and public withdrawals post-superannuation.
   Form 501	Swavalamban sector withdrawals on superannuation.

2. NPS Scheme Withdrawal Forms Before Superannuation

   Form	Applicable For
   Form 102 GP	Used by government employees who want to make a withdrawal before retirement.
   Form 302	Used by corporate employees and other citizens who want to make a withdrawal before superannuation.
   Form 502	Subscribers who are part of the Swavalamban sector.

3. NPS Scheme Withdrawal Form For Claimants on Demise of the Subscriber

   Form	Applicable For
   Form 103 GD	For NPS subscribers, government employees' beneficiaries/heirs are to claim the accumulated amount.
   Form 303	For NPS subscribers, corporate employees, and citizens' beneficiaries/heirs are to claim the accumulated amount.
   Form 503	For Swavalamban sector subscribers' beneficiaries/heirs to claim the accumulated amount.

Key Takeaway

The National Pension Scheme of India, in its essence, is a vital initiative by the government of India, created in a bid to offer long-term financial welfare to its citizens after retirement. This scheme provides a reliable and regulated channel for citizens to systematically save a corpus for their retirement. Hence, it is critical to the establishment of a credible retirement planning infrastructure for the citizens and the people to save for a future that builds their resilience against a financially volatile time ahead.