Achi news desk-
The National Pension System (NPS) is designed as a voluntary retirement savings programme, enabling subscribers to make pre-determined contributions towards planned savings, ensuring future financial security in the form of a pension. It represents a collective effort to address the challenge of providing adequate retirement income to all Indian citizens in a sustainable manner.
Also Read: New NPS Login Rules From April 1: Aadhaar Two-Factor Authentication Made Mandatory
On regular exit from the NPS, subscribers have the option to utilize their accumulated pension wealth by purchasing a life annuity from a life insurance company approved by the Pension Fund Regulatory and Development Authority (PFRDA). In addition, they can choose to withdraw a portion of their accumulated pension wealth as a lump sum. The PFRDA acts as the central agency responsible for the implementation and supervision of the NPS.
Who can open a GCC account under the Every Citizen Model
A citizen of India, whether resident or non-resident, is subject to the following conditions:
Applicants should be between 18 – 70 years of age from the date of submission of their application and should comply with the prescribed KYC norms.
Benefits of a GCC Account
i) Low Cost:-
GCC is considered to be the world’s lowest cost pension scheme. Administrative charges and fund management fees are also the lowest
ii) Simple:-
All the applicant has to do is open an account with any of the POPs run through all major post offices across India and get a Permanent Retirement Account Number (PRAN)
iii) Flexible:-
Applicants can choose its investment option and the Pension Fund or choose Auto Choice to get better returns.
iv) Mobile:-
Applicants can operate an account from anywhere in the country and can pay contributions through any of the POP-SPs regardless of the POP-SP branch the applicant is registered with, even if he / she changes her city, job, etc., and also makes contributions through eNPS. The account can be moved to any other sector such as the government sector, or a corporate model in case the subscriber gets employment.
Tax benefit for employees;
Individuals who are employed and contribute to NPS would enjoy tax benefits on their contributions as well as their employer’s contribution as follows: –
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The employee’s contribution –
Eligible for tax deduction up to 10% of Salary (Basic + DA) under Section 80 CCD(1) within the general upper limit of Rs. 1.50 lakhs under Section 80 CCE.
the employer’s contribution;
​The employee is eligible for a tax deduction of up to 10% of the Salary (Basic + DA) contributed by the employer under Section 80 CCD(2) above the limit of Rs. 1.50 lakhs is provided under Section 80 CCE.
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Tax benefit for self-employed people:
Eligible for tax deduction up to 10 % of gross income under Section 80 CCD (1) within the general upper limit of Rs. 1.50 lakhs under Section 80 CCE. A deduction is allowed to the subscriber in addition to the deduction allowed under Sec. 80CCD(1) for additional contribution in his GCC account subject to a maximum investment of Rs 50,000 under sec. 80CCD 1(B)
Types of Accounts;
Tier -I Account –
The applicant will contribute his retirement savings to this condition; & limited withdrawal account. This is the retirement account and applicants can claim tax benefits against the contributions made subject to the Income Tax rules in force.
Tier-II Account –
This is a voluntary savings facility. The applicant will be free to withdraw their savings from this account whenever they wish. This is not a retirement account and applicants cannot claim any tax benefits against contributions to this account.
Contributions;
The subscriber can contribute the amount through cash, local cheque, demand draft, or Electronic Clearing System (ECS) at his preferred POP-SP. However, for cash transactions exceeding Rs.50000/- the subscriber needs to submit a copy of the PAN card as per the Anti Money Laundering (AML) rules.
Minimum Contributions (For Tier-I):-
- Minimum contribution at the time of account opening and for all subsequent transactions – Rs 500
- Minimum contribution per year – Rs 1,000 excluding charges and taxes
- Minimum number of contributions in a year – 01
Charges and Penalty for non-compliance with mandatory minimum contributions:-
- If the subscriber contributes less than Rs 1,000 in a year, his account will be frozen and the facilities provided by CRA like online view of the account, etc. will be restricted.
- To recreate the account, the subscriber would have to pay the minimum contributions of Rs 500
- A frozen account will be closed when the account value falls to zero.
Minimum Contributions (For Tier-II):-
​Minimum contribution at the time of account opening – Rs 1000 and for all subsequent transactions a minimum per contribution of Rs 250
There is no minimum contribution requirement for the financial year and there is also no cap on the maximum contribution.
Things to Consider:
- NPS has a lock-in period until retirement, with exceptions for certain situations.
- Returns are linked to the market, so they can vary.
- Carefully consider your risk tolerance when choosing an investment option.
Disclaimer: The opinions and investment tips of experts in this News18.com report are their own and not those of the website or its management. Readers are advised to check with certified experts before making any investment decisions.
