Small Savings Schemes

Small savings schemes are designed to provide safe and attractive investment options to the public and at the same time to mobilize resources for development. National Savings Organization (NSO) is responsible for national level promotion of small savings scheme. These schemes are meant for small urban and rural investors. Institutions and Non-Resident Indians (NRIs) are also eligible to invest in small savings schemes.

Schemes Under Small Savings Schemes

Sukanya Samriddhi Account

Sukanya Samriddhi Account has been introduced by the Govt. of India to promote the welfare of Girl Child by securing her future through proper financial planning. It is a part of the “Beti Bachao – Beti Padhao” initiative of Government of India (GOI).

Features of Sukanya Samriddhi Account:

  • A natural / legal guardian on behalf of a girl child can open this account till she attains the age of 10 years.
  • Only one account can be opened in the name of the girl child.
  • Account can be opened in Post offices and notified branches of commercial bank.
  • Birth Certificate of the girl child in whose name the account is opened must be submitted.
  • Account can be opened with initial deposit of Rs 1000 and thereafter any amount in multiple of Rs 100 can be deposited subject to max limit of Rs. 1,50,000 lakh during financial year. Every financial year, a minimum sum of Rs 1000 should be deposited to keep the account operative.
  • On attaining age of 10 years, a girl child can operate her account.
  • Account can be transferred anywhere in India from one post office/ bank to another.
  • Money can be deposited by cash / cheque / demand draft.
  • The account shall mature on completion of 21 years from the date of opening of account.
  • On maturity of Sukanya Samriddhi Account, the account balance along with accrued interest will be paid directly to the account holder i.e. Girl Child.
  • One withdrawal is allowed on attaining the age of 18 years of account holder to meet education / marriage expenses at the rate of 50% of the balance lying in the account as the end of previous financial year.
  • Premature closure is allowed in the event of death of the depositor or in cases of extreme compassionate grounds such as medical support in the life threatening diseases.
  • In order to encourage people to open Sukanya Samriddhi Account, Govt. has exempted contribution to this account u/s 80C of the Income Tax Act, 1961.
  • Interest earned (maturity amount) is also Tax free.
  • Rate of interest 8.6% Per Annum(w.e.f 1-4-2016),calculated on yearly basis ,Yearly compounded.

Post Office Savings Account

Features of Post Office Savings Account:

  • Account can be opened by cash only.
  • Minimum amount for opening the account is INR 20/-.
  • Minimum balance to be maintained in a non-cheque facility account is INR 50/-.
  • Cheque facility can be taken in an existing account also.
  • Interest earned is Tax Free up to INR 10,000/- per year from financial year 2012-13.
  • Interest earned is Tax Free up to INR 10,000/- per year from financial year 2012-13.
  • Nomination facility is available at the time of opening and also after opening of account.
  • Account can be transferred from one post office to another.
  • One account can be opened in one post office.
  • Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account.
  • Joint account can be opened by two or three adults.
  • At least one transaction of deposit or withdrawal in three financial years is necessary to keep the account active.
  • Single account can be converted into Joint and Vice Versa.
  • Minor after attaining majority has to apply for conversion of the account in his name.
  • Deposits and withdrawals can be done through any electronic mode in CBS Post offices.
  • Inter Post office transactions can be done between CBS post offices.
  • ATM/Debit Cards can be issued to Savings Account holders (having prescribed minimum balance on the day of issue of card) of CBS Post offices.

Interest Payable:

4.0%per annum on individual / joint accounts.

5 Year Post Office Recurring Deposit Account

Features of 5 Year Post Office Recurring Deposit Account:

  • Account can be opened by cash/cheque and in case of cheque the date of deposit shall be date of presentation of cheque.
  • Minimum amount for opening the account is RS. 10/- per month and thereafter any amount in multiples of RS. 5/-.
  • No maximum limit.
  • Nomination facility is available at the time of opening and also after opening of account.
  • Account can be transferred from one post office to another.
  • Any number of accounts can be opened in any post office.
  • Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account.
  • Joint account can be opened by two adults.
  • Subsequent deposit can be made up to 15th day of next month if account is opened up to 15th of a calendar month and up to last working day of next month if account is opened between 16th day and last working day of a calendar month.
  • If subsequent deposit is not made up to the prescribed day, a default fee is charged for each default, default fee @ 5 paisa for every 5 rupee shall be charged. After 4 regular defaults, the account becomes discontinued and can be revived in two months but if the same is not revived within this period, no further deposit can be made.
  • If in any RD account, there is monthly default(s) the depositor has to first pay the defaulted monthly deposit with default fee and then pay the current month deposit. This will be applicable for both CBS and non CBS Post offices.
  • There is rebate on advance deposit of at least 6 installments.
  • Single account can be converted into Joint and Vice Versa.
  • Minor after attaining majority has to apply for conversion of the account in his name.
  • One withdrawal up to 50% of the balance allowed after one year.
  • In case of deposits made in RD accounts by Cheque, date of credit of Cheque into Government accounts shall be treated as date of deposit.

Interest Payable:

From 01-04.2016, interest rate is 7.40% per annum (compounded quarterly), that is, on maturity Rs. 10/- account will become Rs. 726.97.

Post Office Time Deposit Account

Features of Post Office Time Deposit Account:

  • Account may be opened by individual. Account can be opened by cash/cheque and in case of cheque the date of realization of cheque in Govt. account shall be date of opening of account.
  • Minimum amount for opening the account is INR 200/-.
  • No maximum limit.
  • Nomination facility is available at the time of opening and also after opening of account.
  • Account can be transferred from one post office to another.
  • Any number of accounts can be opened in any post office.
  • Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account.
  • Joint account can be opened by two adults.
  • Single account can be converted into Joint and Vice Versa.
  • Minor after attaining majority has to apply for conversion of the account in his name.
  • In CBS Post offices, when any Term Deposit (TD) account is matured, the same TD account will be automatically renewed for the period for which the account was initially opened e.g. 2 Years TD account will be automatically renewed for 2 Years. Interest rate applicable on the day of maturity will be applied.
  • No Lock in period.
  • For premature closer of TD accounts before one Year, interest @ savings account applicable from time to time shall be payable. This will be applied for both CBS and non CBS Post offices.
  • The investment under 5 Years TD qualifies for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007.

Interest Payable:

Interest is payable annually but calculated on quarterly basis.

From 01-04-2016, interest rates are as follows:-


Interest payable annually but calculated quarterly. 
From 1.4.2016, interest rates are as follows:-

 Period  Rate 
1yr.A/c 7.1% 
2yr.A/c 7.2% 
3yr.A/c 7.4%
 5yr.A/c 7.9%

Kisan Vikas Patra

Features of Kisan Vikas Patra:

  • Certificate can be purchased by an adult for himself or on behalf of a minor or by two adults.
  • KVP can be purchased from any Departmental Post office.
  • Minimum deposit of Rs 1000/-.
  • No maximum limit.
  • Available in the denominations of Rs.1000, 5000, 10000 and Rs. 50000.
  • Facility of nomination is available.
  • Certificate can be transferred from one person to another and from one post office to another.
  • Certificate can be encashed after 2 & 1/2 years from the date of issue.

Interest Payable:

From 01-04-2016, Interest rate is 7.8% pa, that is, amount Invested doubles in 100 months (8 years & 4 months).

National Savings Certificate

National Savings Certificate, popularly known as NSC is an Indian Government Savings Bond issued by the Post Office. It is primarily used as small savings and income tax savings instruments (Deposit qualifies for tax rebate under sec 80c of IT Act.)

Features of National Savings Certificate:

  • Certificate can be purchased by an adult for himself or on behalf of a minor or by a minor.
  • Trust and HUF cannot invest in this scheme.
  • Minimum deposit of INR 100/-.
  • No maximum limit.
  • Available in denominations of INR 100/-, 500/-, 1000/-, 5000/- and 10000/-.
  • Only principal amount deposited in this scheme qualifies for tax rebate under Sec. 80C of IT Act.
  • Interest earned is taxed according to the marginal rate of taxation of the investor.
  • The interest accruing annually but deemed to be reinvested under Section 80C of IT Act.
  • In case of NSC VIII and IX issue, transfer of certificates from one person to another can be done only once from date of issue to date of maturity.
  • At the time of transfer of Certificates from one person to another, old certificates will not be discharged. Name of old holder shall be rounded and name of new holder shall be written on the old certificate and on the purchase application (in case of non CBS Post offices) under dated signatures of the authorized Postmaster along with his designation stamp and date stamp of Post office.

Interest Payable:

From 01-04-2016, interest rates are as follows:-

5 Years National Savings Certificate (VIII Issue) 8.10% compounded six monthly but payable at maturity i.e. Rs. 100/- grows to Rs. 151.62 after 5 years.

10 Years National Savings Certificate (IX Issue) 8.80% compounded six monthly but payable at maturity i.e. Rs. 100/- grows to Rs. 236.60 after 10 years.

Post Office Monthly Income Account

Features of Post Office Monthly Income Account:

  • Account may be opened by individual.
  • Account can be opened by cash/cheque and in case of cheque the date of realization of cheque in Govt. account shall be date of opening of account.
  • Investment can be done in multiples of INR 1500/-.
  • Maximum investment limit is INR 4.5 lakhs in single account and INR 9 lakhs in joint account.
  • Nomination facility is available at the time of opening and also after opening of account.
  • Account can be transferred from one post office to another.
  • Any number of accounts can be opened in any post office subject to maximum investment limit by adding balance in all accounts.
  • Account can be opened in the name of minor and a minor of 10 years and above age can open and operate the account.
  • Joint account can be opened by two or three adults.
  • All joint account holders have equal share in each joint account.
  • Single account can be converted into Joint and Vice Versa.
  • Minor after attaining majority has to apply for conversion of the account in his name.
  • Maturity period is 5 years from 1.12.2011.
  • Interest can be drawn through auto credit into savings account standing at same post office, through PDCs or ECS. In case of MIS accounts standing at CBS Post offices, monthly interest can be credited into savings account standing at any CBS Post offices.
  • Can be prematurely en-cashed after one year but before 3 years at the discount of 2% of the deposit and after 3 years at the discount of 1% of the deposit. (Discount means deduction from the deposit.)
  • A bonus of 5% on principal amount is admissible on maturity in respect of MIS accounts opened on or after 8.12.07 and up to 30.11.2011. No bonus is payable on the deposits made on or after 1.12.2011.

Interest Payable:

From 01-04-2016, interest rate is 7.80% per annum payable monthly.

Public Provident Fund (PPF)

Public Provident Fund is a long term investment instrument introduced by the National Savings Institute of the Ministry of Finance, framed under the Public Provident Fund Act, 1968.

Features of Public Provident Fund:

  • An individual can open account with INR 100/- but has to deposit minimum of INR 500/- in a financial year and maximum INR 1,50,000/- (with effect from 23.08.2014)
  • Deposits can be made in lump-sum or in 12 monthly installments.
  • Joint account cannot be opened.
  • HUF and NRIs are not eligible to open PPF accounts.
  • Account can be opened by cash/cheque. In case of cheque; the date of realization of cheque in Govt. account shall be the date of opening of account.
  • Nomination facility is available at the time of opening and also after opening of account.
  • PPF account is transferable to and from permitted branches of nationalized or private sector banks or Post Offices by submitting a request letter by the PPF account Holder to the existing Accounts Office.
  • The subscriber can open another account in the name of minors but subject to maximum investment limit of INR 150000/- by adding balance in all accounts.
  • Maturity period is 15 years but the same can be extended for one or more blocks of 5 years on written request within one year of maturity.
  • Maturity value can be retained without extension and without further deposits also. The balance will continue to earn interest at the notified rates. The subscriber can make one withdrawal of any amount in each financial year.
  • PPF account continues to earn interest at the notified rate even after the death of the subscriber.
  • Premature closure is not allowed before 15 years except in case of death of the subscriber.
  • When subscribers fail to invest the minimum amount Rs 500/- in a financial year, the account will be treated as discontinued. The subscriber in such cases will not be entitled to obtain a loan or make a partial withdrawal unless the account is revived. The subscriber cannot open another PPF account.
  • A discontinued account may be revived by payment of Rs. 50/- as penalty for each year of default along with the arrear subscription of Rs. 500/- for each year.
  • Deposits qualify for deduction from income under Sec. 80C of IT Act.
  • Interest is completely tax-free.
  • Partial withdrawal is permissible every year from 7th financial year from the year of opening account.
  • Withdrawal from a minor’s account is also allowed on submission of declaration from the Guardian.
  • Loan facility can be availed between the 3rd and the 6th financial year of opening the account. Loan up to 25% of the balance at the end of the second year preceding the year in which the loan is applied. Loan is repayable in 36 months. The rate of interest on the loan shall be at 2% per annum above the PPF interest rate. The repayment of loan may be made either in one lump sum or in two or more monthly installments within the prescribed period of thirty six months. The repayment is credited to the subscriber’s account. After the principal of the loan is fully repaid, the subscriber shall pay interest thereon in not more than two monthly installments If the loan is not repaid within the prescribed period of thirty six months, interest on the amount of loan outstanding shall be charged at six per cent per annum instead of at two per cent per annum.
  • No attachment under court decree order.
  • The PPF account can be opened in a Post Office which is double handed and above.

Interest Payable:

From 01-04-2016, interest rate payable is 8.10% per annum compounded annually.

Senior Citizen Savings Scheme

Features of Senior Citizen Savings Scheme:

  • An individual of the Age of 60 years or more may open the account.
  • An individual of the age of 55 years or more but less than 60 years who has retired on superannuation or under VRS can also open account subject to the condition that the account is opened within one month of receipt of retirement benefits and amount should not exceed the amount of retirement benefits.
  • Maturity period is 5 years.
  • There shall be only one deposit in the account in multiples of INR.1000/-
  • Maximum investment limit is INR 15lac.
  • A depositor may operate more than one account in individual capacity or jointly with spouse (husband/wife).
  • Account can be opened by cash for the amount below INR 1 lac and for INR 1 lac and above by cheque only.
  • In case of cheque, the date of realization of cheque in Govt. account shall be date of opening of account.
  • Nomination facility is available at the time of opening and also after opening of account.
  • Account can be transferred from one post office to another.
  • Any number of accounts can be opened in any post office subject to maximum investment limit by adding balance in all accounts.
  • Joint account can be opened with spouse only and first depositor in the joint account is the investor.
  • Interest can be drawn through auto credit into savings account standing at same post office or through PDCs or Money Order.
  • In case of SCSS accounts, quarterly interest shall be payable on 1st working day of April, July, October and January. It will be applicable at all CBS Post Offices.
  • Premature closure is allowed after one year on deduction of an amount equal to1.5% of the deposit & after 2 years 1% of the deposit.
  • After maturity, the account can be extended for further three years within one year of the maturity by giving application in prescribed format. In such cases, account can be closed at any time after expiry of one year of extension without any deduction.
  • TDS is deducted at source on interest if the interest amount is more than INR 10,000/- p.a.
  • Investment under this scheme qualifies for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007.

Interest Payable:

From 01-04.2016, interest rate payable is 8.60% per annum. Interest shall be payable on 31st March, 30th June, 30th Sept and 31st December.

National Pension System

Government of India established Pension Fund Regulatory and Development Authority (PFRDA) on 10th October, 2003 to develop and regulate pension sector in the country. The National Pension System (NPS) was launched on 1st January, 2004 with the objective of providing retirement income to all the citizens. NPS aims to institute pension reforms and to inculcate the habit of saving for retirement amongst the citizens.

Initially, NPS was introduced for the new government recruits (except armed forces). With effect from 1st May, 2009, NPS has been provided for all citizens of the country including the unorganised sector workers on voluntary basis.

Additionally, to encourage people from the unorganised sector to voluntarily save for their retirement the Central Government launched a co-contributory pension scheme, 'Swavalamban Scheme' in the Union Budget of 2010-11. Under Swavalamban Scheme, the government will contribute a sum of Rs. 1,000 to each eligible NPS subscriber who contributes a minimum of Rs. 1,000 and maximum Rs. 12,000 per annum. This scheme is presently applicable upto F.Y.2016-17.


NPS offers following important features to help subscriber save for retirement:

The subscriber will be allotted a unique Permanent Retirement Account Number (PRAN). This unique account number will remain the same for the rest of subscriber's life. This unique PRAN can be used from any location in India.


PRAN will provide access to two personal accounts:

  • Tier I Account: This is a non-withdrawable account meant for savings for retirement.
  • Tier II Account: This is simply a voluntary savings facility. The subscriber is free to withdraw savings from this account whenever subscriber wishes. No tax benefit is available on this account.

Who can join NPS?

1) Central Government Employees:

NPS is applicable to all new employees of Central Government service (except Armed Forces) and Central Autonomous Bodies joining Government service on or after 1st January 2004. Any other government employee who is not mandatorily covered under NPS can also subscribe to NPS under "All Citizen Model" through a Point of Presence - Service Provider (POP-SP).

Contribution to NPS: For the Central Government employees contribution through their nodal office to National Pension System (NPS) is mandatory. Every month 10% of his/ her salary (basic + DA) and equivalent government's contribution will be invested in NPS.


Withdrawal: As per the guidelines of Pension Fund Regulatory & Development Authority (PFRDA) or Ministry of Finance, the subscribers can withdraw from NPS on his/ her retirement, resignation or death.

On retirement a subscriber would be required to invest minimum 40% of his / her accumulated savings to purchase a life annuity from Pension Fund Regulatory & Development Authority (PFRDA) empanelled and Insurance Regulatory and Development Authority (IRDA) approved Annuity Service Providers (ASPs). Around 80% of amount has to be annuitized and remaining can be withdrawn by the subscriber on resignation. In case of death of the subscriber, entire amount will be handed over to the nominee.


2) Corporate:

A Corporate would have the flexibility to decide investment choice either at subscriber level or at the corporate level centrally for all its underlying subscribers. The corporate or the subscriber can choose any one of Pension Fund Managers (PFMs) available under “All Citizen Model” and also the percentage in which the funds are allocated in various asset classes.


Benefits to Corporate:

NPS-Corporate model provides a platform to the corporate to co-contribute for the employee's pension. The corporate can save expenses incurred on self-administration of pension functions like setting up separate trust, recordkeeping, fund management, providing annuity, etc. Under NPS the corporate may exercise choice of PFM, as also the investment pattern (allocation of corpus amongst three asset classes) for its employees or leave the option to employees.

NPS is a prudentially regulated scheme with transparent investment norms, regular monitoring and performance review of Fund Managers by NPS Trust and overall supervision of Pension Fund Regulatory & Development Authority (PFRDA). It offers a lot of flexibility in terms of choice of investment mix across Equity (max upto 50%), Corporate and Government bonds.

Those not financially aware or inclined can manage the funds passively by opting for Life Cycle Fund in NPS in which the 50% equity exposure is reduced by 2% every year after the investor turns 35 till it becomes 10%. This is in keeping with the strategy to opt for higher- risk- higher- return portfolio mix earlier in life, when there is ample time to make up for any possible black swan event. Gradually one can move on to fixed- return -low -risk portfolio as one approaches retirement. Also, the choice of PFMs and the investment pattern can be changed once in a year.

Also, employer can claim tax benefits for the amount contributed towards pension of employees upto 10% of the salary (basic and dearness allowance) as Business Expense' from their Profit & Loss account under section 36(1) of the IT-Act.


Contribution to NPS:

A Corporate would have flexibility to provide investment scheme preference (PFM and Investment choice) either at subscriber level or at the corporate level centrally for all its underlying subscribers.


Withdrawal:

As per the guidelines of Pension Fund Regulatory & Development Authority (PFRDA) or Ministry of Finance, the subscribers can withdraw from NPS on his/ her retirement, resignation or death.

On retirement a subscriber would be required to invest minimum 40% of his / her accumulated savings to purchase a life annuity from Pension Fund Regulatory & Development Authority (PFRDA) empanelled and Insurance Regulatory and Development Authority (IRDA) approved Annuity Service Providers (ASPs). Around 80% of amount has to be annuitized and remaining can be withdrawn by the subscriber on resignation. In case of death of the subscriber, entire amount will be handed over to the nominee.


3) Individual:

All citizens of India between the age of 18 and 60 years as on the date of submission of his / her application to Point of Presence (POP) / Point of Presence-Service Provider (POP-SP) can join NPS.


Contribution to NPS:

To contribute in Tier I and Tier II account, a subscriber is required to make his / her first contribution at the time of applying for registration (minimum contribution Rs.500 for Tier I and Rs.1000 for Tier II) at any POP-SP with NCIS (NPS Contribution Instruction Slip) form.

The NPS subscriber is required to make contributions subject to the following conditions:

  • Minimum amount at the time of Account opening - Rs.500
  • Minimum amount per contribution - Rs.500
  • Minimum contribution per year - Rs.6,000
  • Minimum number of contributions in a year - one

A subscriber can decide on the frequency of the contributions across the year as per his / her convenience. No maximum limit has been mandated.

For Tier II, minimum contribution requirements are:

  • Minimum contribution at the time of account opening - Rs.1000
  • Minimum amount per contribution - Rs.250
  • Minimum number of contributions in a year – one
  • Maintain minimum balance of Rs.2000 at the end of each financial year

Withdrawal:

In Tier I account, a subscriber can withdraw from NPS on his/ her retirement, resignation or death. On retirement a subscriber would be required to invest minimum 40% of his / her accumulated savings to purchase a life annuity from Pension Fund Regulatory & Development Authority (PFRDA) empanelled and Insurance Regulatory and Development Authority (IRDA) approved Annuity Service Providers (ASPs). Around 80% of amount has to be annuitized and remaining can be withdrawn by the subscriber on resignation. In case of death of the subscriber, entire amount will be handed over to the nominee.

To withdraw from Tier II account, the subscriber needs to submit UOS – S12 form to the associated POP-SP. If the request is entered and authorised in CRA system by the POP/POPSP before 1.30 PM, then it goes for same day's processing, or else it goes for the next business day. The redemption amount may vary due to the variation of NAV. Units are redeemed based on the NAV declared at the end of the processing day. On date of processing with addition of 3 days, the funds are transferred from the Trustee Bank to subscriber's bank account as registered in the CRA system.


4) Unorganised Sector Workers – Swavalamban Yojana:

A citizen of India between the age of 18 and 60 years as on the date of submission of his / her application, who belongs to the unorganized sector or is not in a regular employment of the Central or a state government, or an autonomous body/ public sector undertaking of the Central or state government, can open NPS -Swavalamban account. The subscriber of NPS – Swavalamban account should not be covered under social security scheme like Employees' Provident Fund and miscellaneous Provisions Act, 1952, The Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948, The Seamen's Provident Fund Act, 1966, The Assam Tea Plantations Provident Fund and Pension Fund Scheme Act, 1955 and The Jammu and Kashmir Employees' Provident Fund Act, 1961.


Contribution to NPS:

The subscriber of NPS Lite account is required to make contributions at the time of registration and subsequently through an Aggregator. The contributions made are subjected to following conditions:

  • Minimum contribution amount at the time of Registration - Rs.100
  • Though there is no minimum contribution requirement per year, minimum contribution of Rs.1000/-per year is recommended to avail Swavalamban benefit. However, it may be remembered the higher contribution amount will yield higher pension and since Swavalamban benefit is available for contribution upto Rs.12000/- it may be desirable to save higher amounts in your NPS-Swavalamban account.

Withdrawal:

The normal exit from NPS – Swavalamban account is at the age of 60. However, early withdrawal is also permitted with certain conditions. On withdrawal from NPS Lite account on 60 years of age, the subscriber would be required to invest minimum 40% of accumulated savings (pension wealth) to purchase annuity. At the time of exit, the effort is to give a monthly pension of Rs.1000/-. If 40% of the amount is not sufficient to give pension of Rs.1000/- higher percentage or entire pension wealth would be subject to annuitisation. On withdrawal before 60 yrs, the subscriber would be required to invest minimum 80 % of accumulated savings to purchase annuity. He can withdraw rest of the 20% amount.

In case of death of the subscriber, the entire amount will be transferred to the nominee/ legal heirs. The nominee/ legal heir will approach the aggregator with necessary documents such as Death Certificate, Identity proof of the nominee, etc.


Benefits of NPS

Some of the benefits of the National Pension System (NPS) are:

  • 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 simple - All the subscriber has to do, is to open an account with his/her nodal office and get a Permanent Retirement Account Number (PRAN).
  • It is portable - Each employee is identified by a unique number and has a separate PRAN which is portable i.e., will remain same even if an employee gets transferred to any other office.
  • It is regulated - NPS is regulated by Pension Fund Regulatory and Development Authority, with transparent investment norms & regular monitoring and performance review of fund managers by NPS Trust.

Tax Benefits

Presently, the tax treatment for contribution made in Tier I account is Exempted-Exempted-Taxed (EET) i.e., the amount contributed is entitled for deduction from gross total income upto Rs.1.00 lakh (along with other prescribed investments) as per section 80C (as per the provisions of the Income Tax Act, 1961 as amended from time to time).

The appreciation accrued on the contribution and the amount used by the subscriber to buy the annuity is not taxable. Only the amount withdrawn by the subscriber after the age of 60 is taxable.


Charges

All the charges associated to Tier I account including Annual PRA Maintenance charge are paid by the employer. In case of Tier II account, activation charge and transaction charges are paid by the subscriber.

The POP charges and the CRA charges are given in the table below:

Intermediary Charge head Service charges* Method of Deduction
CRA PRA Opening charges Rs.50 Through cancellation of units at the end of each quarter.
Annual PRA Maintenance cost per account Rs.190
Charge per transaction Rs.4
POP(Maximum Permissible charge for each subscriber) Initial subscriber registration Rs.100 To be collected upfront
Initial contribution upload 0.25% of the initial contribution amount from subscriber subject to a minimum of Rs.20 and a maximum of Rs.25,000/-
Any subsequent transaction involving contribution upload 0.25% of the amount subscribed by the NPS subscriber, subject to minimum of Rs.20/- and a maximum of Rs.25000/-.
Any other transaction not involving a contribution from subscriber

Service tax and other levies, as applicable, will be levied as per the existing tax laws.