New Delhi: Dreaming of a worry-free retirement? Look no further than the National Pension System (NPS) introduced by the Indian government. It’s a government-backed scheme designed to ensure you have a steady income once you retire. The NPS is overseen by the PFRDA (Pension Fund Regulatory and Development Authority).
How does it work, now this question is making rounds in your mind, right? Well, read on to get each and every points related to it.
Permanent Retirement Account Number (PRAN)
Every NPS participant receives a unique Permanent Retirement Account Number (PRAN), which acts as their financial fingerprint throughout the program.
Who Can Be The Beneficiaries Under This Scheme?
Previously, only Central Government personnel were covered by the NPS program. Employees of the Central Government who begin employment on or after January 1, 2004, are required to get NPS coverage. However, the PFRDA has now voluntarily opened it to all Indian nationals.
For anyone who works in the private sector and needs a consistent pension after retirement, the NPS program is of great benefit. The program has tax advantages under Sections 80C and 80CCD and is transferable between jobs and locales.
How Many Types Of National Pension Scheme Account?
NPS offering the flexibility of two sub-accounts known as tiers under one PRAN.
Tier 1
Tier 1, popularly known as the pension account, lets you contribute up to Rs 50,000, which can qualify for an additional deduction from your taxable income under section 80CCD.
This benefit is over and above the 80C limit of Rs 1.5 lakhs. However, it comes with certain restrictions on withdrawals, subject to specific terms and conditions.
Tier II
Tier II, on the other hand, is an additional investment opportunity. Here, you have the freedom to withdraw your entire corpus at any point in time. Keep in mind that if you haven’t made the initial contribution, the Tier II account will be automatically deactivated.
While there are no tax benefits available for this account, funds from Tier II can be smoothly transferred to Tier I, ensuring a seamless and secure financial journey in your golden years.