“National Pension System” (NPS) means the contributory pension system whereby contributions from a subscriber are collected and accumulated in an individual pension account called PRAN using a system of points of presence, a central recordkeeping agency and pension funds as may be specified by regulations. The Central Government has introduced the Defined Contribution based Pension System known as the National Pension System (NPS) replacing the existing system of Defined Benefit Pension with effect from January 01, 2004 vide its notification Ministry of Finance (Department of Economic Affairs) OM No 5/7/2003 PR Dt 22/12/2003.
- It is transparent - NPS is transparent and cost effective system wherein the pension contributions are invested in the pension fund schemes and the employee will be able to know the value of the investment on day to day basis.
- It is portable - Each employee is identified by a unique number and has a separate Permanent Retirement Account which is portable i.e., will remain same even if an employee gets transferred to any other office.
- It is simple - All the subscriber has to do, is to open an account with his/her nodal office and get a PRAN.
- It is regulated - NPS is regulated by PFRDA, with transparent investment norms & regular monitoring and performance review of fund managers by NPS Trust.
Income Tax Act allows benefits under NPS as per the following sections,
- On Employee’s contribution: Employee’s own contribution is eligible for tax deduction under sec 80 CCD (1) of Income Tax Act up to 10% of salary (Basic + DA). This is within the overall ceiling of Rs. 1.50 Lacs under Sec. 80 CCE of the Income Tax Act.
- On Employer’s contribution: Up to 10% of Basic & DA (no upper ceiling) under 80CCD (2). This rebate is over and above 80 C.
- Exclusive Tax Benefit: As announced by Govt of India in Budget 2015-16, subscriber will be allowed tax deduction in addition to the deduction allowed under Sec. 80CCD(1) for additional contribution in his NPS account subject to maximum of Rs. 50,000/- under sec. 80CCD 1(B).
If you are an existing Government subscriber, you can approach any POP-SP or your Nodal Office or alternatively you can visit eNPS website (https://enps.nsdl.com) for making additional contribution in your Tier I account.
Please note: Tax benefits are applicable for investments in Tier I account only.
The print out of the Transaction Statement could be used as a document for claiming tax benefit.
No. At present, a subscriber cannot avail a loan against his / her NPS holdings.