NPS Swavalamban Yojana

Key Features of the Swavalamban Yojana Scheme

Below are the features of the Swavalamban Yojana Scheme:

• Voluntary Participation: Indian citizens aged 18 to 60 could voluntarily join the scheme and decide their annual contribution amount.
• Low Cost: The scheme operated with low administrative and transaction costs, making it an affordable investment plan for small investors.
• Regulated Management: The Pension Fund Regulatory and Development Authority (PFRDA) regulated the scheme to ensure transparent and safe investment management.
• Investment Diversification: Contributions were invested in government securities, corporate bonds, and equities, providing a balanced investment option to manage risk and growth.
• Long-Term Savings Focus: The scheme encouraged regular contributions over a long period to build a substantial retirement fund.
• Government Incentive: The scheme offered a government contribution of ₹1,000 per year to eligible accounts, provided the subscriber contributes between ₹1,000 and ₹12,000 annually.

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60%

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What Were the Benefits of the NPS Swavalamban Pension Scheme?

The key benefits of the NPS Swavalamban Pension Scheme include:

1. Helped Build a Retirement Fund

   The scheme allowed individuals to save small amounts, accumulating over time regularly. This steady saving created a financial cushion, helping people prepare for retirement without feeling overwhelmed.

2. Offered Financial Stability in Old Age

   With a dedicated fund growing over the years, subscribers could rely on a regular income after retirement. It helped cover everyday expenses and maintain a decent lifestyle without a salary.

3. Supported Those Without Formal Retirement Savings

   Many people in the unorganised sector lacked access to formal pension benefits. This scheme bridged that gap by providing an easy way for them to secure their financial future.

4. Encouraged Habitual Saving

   By contributing regularly, individuals developed a consistent savings habit. This helped grow their pension fund and promoted better financial discipline.

5. Reduced Dependence on Family or Borrowing

   Your pension plan lessens the need to rely on others financially after retirement. It also helped avoid borrowing money, reducing stress and financial burden on you and your family.

6. Simple and Easy to Manage

   The scheme was designed to be user-friendly with straightforward procedures, making it easier for people from all backgrounds to participate and manage their retirement savings.

How Do You Apply for the NPS Swavalamban Scheme?

To benefit from the Swavalamban Pension Yojana, eligible individuals had to register through a simple offline or assisted process. Here's how it was done:

• Obtain the NPS-Swavalamban application form online or from the nearest aggregator.
• Fill the application form with your personal and nominee details.
• Attach required KYC documents like proof of identity and address.
• Pay the initial deposit along with the form.
• Submit the completed application form, documents, and payment to the aggregator.
• Receive your Permanent Retirement Account Number (PRAN) card upon successful registration.

Eligibility Criteria for the NPS Swavalamban Yojana Scheme

Key eligibility criteria for the NPS Swavalamban Yojana Scheme were:

• Indian citizens aged 18 to 60 could join voluntarily.
• It mainly focused on individuals in the unorganised sector who did not receive pension benefits.
• Subscribers chose their annual contribution amount within the range of ₹1,000 to ₹12,000 to be eligible for government co-contribution.
• Accounts opened between 2010 and 2013 qualified for government contributions for five years.

Tax Benefits Available Under NPS

The National Pension Scheme (NPS) offers tax deductions under three sections of the Income Tax Act. Here’s how each section works:

1. Section 80CCD(1): Employee’s Own Contribution

   • Who can claim: Salaried individuals
   • What’s allowed: Deduction up to 10% of salary (Basic + DA), and up to 20% for self-employed
   • Cap: This falls under the overall ₹1.5 lakh limit under Section 80CCD(1)
   • Example:
     • Aryan’s annual Basic Salary + DA is ₹4,00,000.
     • 10% of that is ₹40,000.
     • Aryan can claim this ₹40,000 as a deduction under Section 80CCD(1).
     • But this ₹40,000 is counted within the total ₹1.5 lakh deduction limit, which also includes other investments like PPF, LIC, and ELSS.
     • Note:If Aryan has already used the full ₹1.5 lakh deduction through investments like EPF, LIC, or PPF, he cannot claim the NPS deduction under this section unless he adjusts those contributions.

2. Section 80CCD(1B): Additional Benefit

   • Who can claim: Anyone enrolled in NPS
   • What’s allowed: Additional deduction up to ₹50,000
   • Limit: This amount is claimed separately and is not included within the ₹1.5 lakh limit of Section 80CCD(1)
   • Example:
     • Aryan has already claimed ₹1.5 lakh through EPF, LIC, and PPF.
     • He now puts ₹50,000 more into his NPS account.
     • This ₹50,000 qualifies for a separate deduction under Section 80CCD(1B).
     • By adding this extra amount in NPS, Aryan is able to raise his total tax-saving deduction limit to ₹2 lakh.

3. Section 80CCD(2): Contribution Made by Employer

   • Who can claim: Employees whose employer contributes to their NPS
   • What’s allowed: Deduction up to 10% of Basic + DA under the old regime, 14% under the new tax regime
   • Cap: This deduction does not fall under the ₹1.5 lakh limit of Section 80CCD(1) and is fully separate
   • Example:
     • Aryan’s Basic Pay + DA totals ₹11,00,000 annually.
     • His employer contributes 10% of that, which comes to ₹1,10,000, to his NPS account.
     • This ₹1,10,000 is fully deductible under Section 80CCD(2).
     • Note: This is in addition to the ₹2 lakh possible from Aryan’s own contributions under Section 80CCD(1) and 80CCD(1B).

What Happened to the Scheme?

The Swavalamban Yojana was discontinued in 2016 and replaced by the Atal Pension Yojana (APY). The new scheme continues the objective of financial security for informal sector workers but offers fixed pension benefits and mandatory monthly contributions.

Conclusion

The NPS Swavalamban Pension Yojana was a well-intended initiative by the Indian Government to provide retirement security to workers in the unorganised sector. It encouraged disciplined saving through low-cost contributions and government incentives, helping many build a stable financial future. The scheme laid a strong foundation for retirement planning among informal workers by promoting long-term savings and financial independence.