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Sunday, March 8, 2015

New Pension Scheme : Invest and get more tax rebate

Finance Minister Arun Jaitley in Budget 2015-16 introduced an additional income tax deduction of Rs. 50,000 for contribution to the New Pension Scheme (NPS) under Section 80CCD. NPS is a voluntary pension scheme, which is regulated by the Pension Fund Regulatory and Development Authority.

Under this scheme, subscribers invest in a fund chosen by them and at the time of retirement they get a lump sum amount depending on the performance of that fund. The returns from NPS are not guaranteed; they are market-linked

NPS was introduced in 2004 for the new government employees but from 2009, it was extended to all on a voluntary basis
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NPS structure: The scheme is structured into two tiers: Tier-I and Tier II accounts. The Tier-I account is the non-withdrawable account meant for savings for retirement. The contribution to Tier-I account is only eligible for tax benefits.
1) Tax savings: The extra deduction of Rs. 50,000 on NPS can help those in the highest tax bracket of 30 per cent save an additional Rs. 16,000 in taxes. Those in 20 per cent tax bracket can save over Rs. 10,000 while those in 10 per cent can save over Rs. 5,000.
  • Minimum contribution at the time of account opening -Rs.500/-

  • Minimum amount per contribution - Rs. 500/-

  • Minimum Account Balance at the end of FY - Rs. 6000/-

  • Minimum number of contributions in a year  1

  • The subscriber will exit the scheme after attaining 60 years of age. The subscriber has the option to defer the withdrawal and stay invested in NPS up to 70 years of age however the subscriber is not allowed to make further contributions. He/She has to compulsorily annuitize 40% of the accumulated pension wealth. Option to annuitize 100% of the corpus is also available.

  • Subscribers can exit from NPS even before attaining the age of 60 by using at least 80 per cent of the accumulated pension wealth for purchase of an annuity for providing for the monthly pension. The balance is paid as a lump sum payment to the subscriber.
  • For NPS account opening, subscriber should be in the age group of 18-60 years.
  • As per KYC norms Photo Id proof, Date of birth proof and Address proof are required to be submitted along with application form.
    1. Flexibility to choose between 8 Fund Managers:The subscribers can choose between 8 Fund Managers namely-
      1. ICICI Prudential Life Insurance Company Limited
      2. IDFC Asset Management Asset Management Company Limited
      3. Kotak Mahindra Asset Management Company Limited
      4. Reliance Capital Asset Management Company Limited
      5. SBI Pension Funds Limited
      6. UTI Retirement Solutions Limited.
      7. DSP Blackrock Pension Fund Managers Private Limited
      8. HDFC Pension Management Company Limited
    Click here for the application form

1 comment:

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