National Pension System : Government employees must know these rules to avail big benefits
NPS is regulated under the PFRDA Act, 2013 and regulations framed by the department of Financial Services and PFRDA.
NPS ACCOUNT OPENING RULES
An NPS account of central government employees is opened immediately on joining the service.
The employees need to submit an application form to the Drawing and Disbursing Officer (DDO) and Pay and Accounts Officer (PAO).
NPS MOBILE APP
On joining the NPS, a subscriber gets a Permanent Retirement Account Number (PRAN) to which all his or her contributions are credited.
It acts like a unique identification number for each NPS account.
Subscribers can view their accounts online, including through NPS mobile App.
INVESTMENT IN NPS ACCOUNT
An employee can make contributions above the mandatory limit of 10 per cent in Tier I account of NPS.
However, there would be no matching contribution by the government in respect of the contribution made in excess of the mandatory contribution of 10 per cent.
Employees get the option of choosing a type of investment pattern and pension funds have been made available for government servants.
NPS WITHDRAWAL, EXIT RULES
An employee can exit from NPS normally on superannuation or 60 years of age. However, he or she may also exit from NPS before superannuation on leaving service as epr rules.
If the subscriber exits before 60 years of age, he or she has to invest at least 80 per cent of the accumulated balance to purchase an annuity from annuity service provider registered with PFRDA and the remaining 20 per cent can be withdrawn as lump sum.
On exit from NPS on 60 years of age, an individual would be mandatorily required to invest at least 40 per cent of the accumulated pension wealth in Tier-1 to purchase an annuity from an Annuity service provider registered with PFRDA and a maximum of 60 per cent of the accumulated corpus in the Tier-1 account may be withdrawn as lump-sum.
Subscribers can also invest the entire accumulated corpus for annuity.
Annuity provides a pension for a lifetime for the employee, spouse and dependent parents.
PARTIAL WITHDRAWAL
There is provision for partial withdrawals from NPS Tier-1 which can be upto 25 per cent of employees’ contribution.
There are specified purposes for partial withdrawal, such as education for children, marriage of children, treatment of specified illness, and construction or purchase of a house.
Partial withdrawals can be made after three years of subscription under NPS and a maximum of three such withdrawals can be made during the entire period under NPS.
NPS INCOME TAX BENEFIT
Any individual who is a subscriber of NPS can claim tax benefits under Sec 80 CCD (1) with in the overall ceiling of Rs 1.5 lakh under Sec 80 CCE.
An additional deduction for investment up to Rs. 50,000 in NPS (Tier I account) is available exclusively to NPS subscribers under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under section 80C of the Income Tax Act. 1961.
