NPS Archives -

How To Apply For Premature Withdrawal From NPS?

Sat, 28 Jan 2023 13:49:44 +0000

The Buyt Desk

From January 1,2023 the PFRDA (Pension Fund Regulatory and Development Authority) has declared that all central government employees will have to submit their withdrawal requests in the form of applications for partial withdrawal through their related nodal offices. Employees in central/state autonomous bodies and the central/state government would need to follow this rule. Hence, from now subscribers have to necessarily provide the mandatory documents to nodal officers to verify the reasons for partial withdrawal.

Prior to this rule, the Pension Fund Regulatory and Development Authority(PFRDA) facilitated subscribers to make their partial withdrawals under NPS with self-declaration.This withdrawal rule was announced on January 14, 2021, during the COVID-19 pandemic.

The PFRDA stated that with the reduction of the COVID-19 they want to move back to the older system of partial withdrawal request via respective nodal offices.

PFRDA in a circular of January 14, 2021, declared that NPS partial withdrawals via self-declaration has been stopped. Now the subscriber have to submit their request to POPs or the nodal office. .

Who is Eligible for Premature Withdrawal from NPS?

The NPS (national pension system) is a government-controlled secure investment scheme. It facilitates subscribers to withdraw their amount before maturity or prematurely just after completing their three years. However, they can’t withdraw more than 25% of their total contributions.

The withdrawal is permitted just for certain reasons. For example, children higher education, children’s marriage, critical illness treatment, and purchase or construction of a residential house only in some specified circumstances.

The subscribers are allowed to withdraw partially thrice during the whole subscription tenure under NPS. Based on the investment amount, the subscribers after 60+ age get a specific amount (40-60% of the whole amount) in a single go. The subscriber can withdraw the remaining amount as a pension. INR 500 is the initial minimum deposit. After that, they can invest up to INR 500 or above INR 49,000 in succeeding months.

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Do You Need an NPS Tier II Account?

Tue, 06 Jul 2021 06:16:02 +0000

TheBuyt Team

Have you opened an account under the Government-backed National Pension Scheme (NPS)? If not, you should open it soon. NPS creates an inflation-resistant retirement fund with tax benefits. Overall, it is a good investment option. On registering with NPS, by default, an NPS Tier I account is opened. However, you can voluntarily open an NPS Tier II account. NPS Tier I and Tier II accounts are identical in terms of charges, fund management, and chosen asset groups for investment. Nonetheless, an NPS Tier II account has its benefits.

Requirements for opening an NPS Tier II account

You cannot open a Tier II account until you have been assigned a Tier I account and a PRAN number. In fact, the closure of the Tier I account automatically ceases the existence of the Tier II account.
Only an Indian resident between the ages of 18 to 65 years can open an NPS Tier II account.
Central Government employees have a mandatory three years lock-in period for an NPS Tier II account. On the other hand, private sector employees do not have a lock-in period for the Tier II account.

Benefits of an NPS Tier II account

There are no restrictions on withdrawal from an NPS Tier II account. Thus, you can rely on this investment in a time of emergency.
There is no exit load for withdrawing money from the Tier II account.
You can close the NPS Tier II account by simply filling and submitting the account closing form at the nearest NPS Point-of-Presence.
There is no minimum balance requirement for an NPS Tier II account.
You can quickly transfer funds from the Tier II account to the Tier I account at any time.
Central Government employees can deduct the investment in the NPS Tier II account from their income under Section 80C of the IT Act.
There is no restriction on the contribution to the Tier II account. The initial investment should be a minimum of Rs.1, 000.
At retirement, 40% of the account balance goes towards a pension, and the remaining is paid upfront. Withdrawal of the complete sum is possible only if the balance is equal to or less than Rs.2 lakhs.
In the case of the death of the subscriber, 80% of the account balance goes towards a monthly pension to the spouse. The remaining lump sum amount is paid to the nominee or the legal successor. If the account balance is less than or equal to Rs.2 lakhs, the nominee or the legal successor can make a complete withdrawal.
For a premature withdrawal, 80% of the account balance goes towards a monthly pension, while the remaining amount is paid as a lump sum amount. If the total balance is less than or equal to Rs.1 lakh on the date of closure, then complete withdrawal is possible.

While only a Tier I account is sufficient to subscribe to the NPS scheme, a Tier II account opens a box of opportunities. An option to withdraw money at any time without any penalty is quite an attractive prospect for the Tier II account.

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Will I Get A Tax Benefit in the NPS Tier II Account as well?

Mon, 28 Jun 2021 05:11:57 +0000

The Buyt Desk

National Pension System (NPS) is an investment plan which helps in accumulating a corpus for your retirement years. You contribute in market-linked pension funds based on equity, corporate debt or government securities and receive a return as per the fund’s performance. There are two types of NPS account- Tier I and Tier II. Both the accounts can be opened with the registered bank which is known as a point of presence service provider or directly through the NPS trust’s website (https://enps.nsdl.com/eNPS/NationalPensionSystem.html).

Difference Between NPS Tier I & Tier II Account

The tier I account is the pension account which has a mandatory maturity time. The subscriber can withdraw money from the tier I account only after he/she turns 60 years of age. At the time of maturity, subscribers can withdraw 60% of the amount as a lump sum. He/she will have to buy an annuity plan from the rest of the 40% of the amount which will be disbursed as a monthly or quarterly pension to the subscriber. The NPS tier II account on the other hand is a voluntary account with the flexibility of withdrawal and exit at any time. There is no hard and fast rule related to the maturity period for tier II accounts. But you must have a tier I account then only can you open a tier II account. The Tier II account can be opened with a minimum contribution of Rs 1000.

Taxability on NPS

NPS Tier I – The tier I subscriber gets a deduction of Rs 1.5 under section 80C of the Income Tax Act. In addition to this Rs 50,000 deduction under section 80CCD(1B). If you are salaried and the employer is also contributing towards your NPS then the employer’s contribution will be allowed tax exemption under section 80 CCD 2 of the IT Act. But the employer’s contribution can’t be more than 10% of the basic salary.

NPS Tier II- There were no tax benefits on NPS Tier II until 2019-20. But from FY 20-21 NPS tier II will give tax deduction on a conditional basis. The subscriber will have to fulfil the following criteria-

Only Central government employees will get tax exemption on tier II investment. It is called the NPS Tier II Tax Saving scheme and is open only for government employees. Private sector employees can have tier II accounts but without any tax exemption. For a regular investor, it would be like an investment in open-ended mutual fund investment. The Central Government employee will get a tax deduction of Rs 1.5 lakhs under section 80 C but only if they agree to follow a 3-year lock-in.
No withdrawals can be made during the 3-year lock-in period. But in case of the death of the subscriber, the nominee/legal heir will get permission to withdraw the money prematurely.
In case of closure or premature exit from NPS tier I, the Tier II account will have to be closed as well.
The Tier II account does not offer any investment choice to the subscriber. The asset mix will have equity ( between 10 to 20%) , debt ( up to 90%) and liquid funds ( up to 5%).

Hope we have helped you in giving a better understanding of NPS tier II accounts. It is simply a secondary account with no lock-in period. It allows you to invest in market-linked pension funds and the pension fund manager’s cost is very low at 0.01% as compared to other funds’ cost which could be anywhere between 0.5% to 2 %.

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New Rules of National Pension System (NPS)

Sat, 26 Jun 2021 06:09:20 +0000

The Buyt Desk

To allow more flexibility to the National Pension System (NPS) there have been 3 key changes. Pension Fund Regulatory and Development Authority’s (PFRDA) new gazette notification has specified the new rules. NPS is very strict when it comes to withdrawal of money. At the time of maturity i.e when the subscriber turns 60 he/she can withdraw a lumpsum of just 60% from their accumulated corpus but with new provision in place a subscriber will be allowed to withdraw 100% of the corpus with certain conditions.

What is NPS and how does it work?

NPS is an investment cum retirement plan. You can start the investment with a monthly contribution of only Rs 1000. You will contribute to market linked pension funds and accumulate a corpus. The performance of the pension fund will add return to your deposit. Once you turn 60 years of age you can withdraw 60 % of the pension corpus and you will have to mandatorily purchase an annuity plan from the rest of the 40% of the corpus.This 60-40% rule has been relaxed by PFRDA. Let’s dive deep and look at the new rules of NPS and how it will impact the NPS investors.

Withdrawal Rules Relaxed

The NPS subscriber is now allowed to withdraw the full contribution amount in one go without diverting any part toward annuity if his/her accumulated pension corpus is equal to or less than Rs 5 lakh. Small investors with a smaller corpus i.e upto Rs 5 lakh and less are allowed to withdraw the full amount thuus giving them the option to choose to further invest it in instruments of their liking or use it as per their own situation. This increases freedom for small investors.

Entry Age Increased

The maximum entry age of NPS has been 65 but now as per the new gazette notification of PFRDA the entry age has risen to 70 years. The exit age limit has also been increased and it is now 75 years. A person upto the age of 70 years is allowed to join NPS and the final age of NPS maturityuy goes up by 5 years and will be upto 75 years.

Premature Withdrawal Limit

As per the existing rules an NPS subscriber can partially withdraw upto 25% of the corpus for specific reasons like illness, higher education of children or purchase of house. Now PFRDA increases the premature withdrawal limit to Rs 2.5 lakh which was earlier Rs 1 lakh. This increase in threshold means that the investor whose accumulated corpus is just Rs 2.5 lakh or less he/she can withdraw the entire 100% lumpsum.

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Is Partial Withdrawal from NPS Allowed?

Fri, 11 Jun 2021 07:27:54 +0000

The Buyt Desk

National Pension Scheme(NPS) is a government-run pension scheme. It was started in 2004 for government employees and then in 2009, it was opened for all the salaried personnel, professionals and even businessmen. The subscriber of NPS contributes regularly to a pension account during his/her working life. When the subscriber reaches the age of 60 he/she can withdraw 60% of the corpus which will be tax-free. But the rest of the 40% of the corpus should be utilised mandatorily for buying an annuity plan. The 40% of the corpus will serve as a regular pension and will be taxed as per your income slab.

NPS Tier I Withdrawal Rule

The NPS account matures at the age of 60. But if there is a sudden requirement of money and you have funds in your NPS account then it can come to your rescue. But remember you can make a partial withdrawal and that too in the framework of rules. Let us have a look at the rules that you need to follow if you want to withdraw from your NPS –

Partial withdrawals can be made only for specified reasons such as medical treatment, marriage, higher education of children, purchase and construction of the property or starting your own business.
During the lifetime of your NPS, you are allowed to make 3 partial withdrawal and such withdrawals can be made only after 3 years of account opening.
An NPS investor can withdraw only 25% of his contribution portion. That is, the calculation for partial withdrawal will be done only on that part of the total amount to which the investor has contributed.
The calculation for partial withdrawal will be only on that portion of the total amount contributed by the investor. The additional interest earned on the amount will not be counted for partial withdrawal.
There should be a gap of 5 years between two partial withdrawals. In case of a medical emergency, this gap is pardoned.
Partial withdrawal can be applied by logging in online. The online application can be made for partial withdrawal. Subscriber can fill up the Partial Withdrawal Form (601-PW) and submit it to the Point of Presence service provider along with the required documents.

Premature Closure of NPS

If the subscriber wants to exit NPS before the completion of 60 years of age he/she can do so. They are allowed to withdraw only 20% of the corpus and have to mandatorily put 80% of the money in the annuity plan. If the accumulated amount is less than 1 lakh then in such a situation 100% of the money can be withdrawn. If the investor dies, then the entire money is given to the nominee.

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5 Things You Must Know About NPS

Fri, 14 May 2021 11:38:14 +0000

The Buyt Desk

National Pension System(NPS) is a pension focussed scheme. The sole purpose of NPS is to ensure accumulation of a retirement corpus. It was launched in 2004 for government employees only but later it was extended for private sector salaried employees and even self-employed were allowed to have a pension account under the NPS scheme.

It is a defined contribution plan

The member of NPS contributes a certain amount towards the retirement corpus. The contribution could be as low as Rs 500. When the member turns 60 years of age he/she is allowed to withdraw 60% of the corpus and with the rest of the 40%, they have to buy an annuity plan which will be paid out like a regular pension.

Asset Classes offered by NPS

There are 3 asset classes offered by NPS Pension Fund Managers (PFMs) for investment. You can choose from any of the following-

Equity (E) – Scheme invests predominantly in Equity market instruments
Corporate Debt (C) – Scheme invests in Bonds issued by Public Sector Undertakings (PSUs), Public Financial Institutions (PFIs), Infrastructure Companies and Money Market Instruments
Government Securities (G) – Scheme invests in Securities issued by Central Government, State Governments and Money Market Instruments

3.Two choices of Asset Allocation

You can either take an active choice or an auto choice. In an active choice, you make your choice about how much you want to allocate to equity( you can’t allocate more than 75%), Corporate( up to 100%) or Government securities(up to 100%).

After 50, the upper limit of equity tapers by 2.5 per cent each year until it reaches 50 per cent by age 60.

In the Auto choice, the investments are made in a life-cycle fund with three life cycle funds (LC) to choose from

Moderate Life Cycle Fund: It is the default option that caps the equity exposure to a maximum of 50%
Conservative Life Cycle Fund: As the name suggests, it takes a conservative approach to invest with maximum equity allocation capped at 25%
Aggressive Life cycle Fund: In this option, maximum equity allocation can go up to 75%

4. Tax Advantage of NPS

It is an exempt-exempt-exempt (EEE) product, you get tax advantages when you invest , interest earned is tax free and withdrawal of 60% of the corpus is also exempted from tax.

5. What happens on voluntary retirement?

On normal retirement, you can withdraw 60% of the corpus accumulated, totally tax-free. However, if you choose to retire before 60, you will be allowed to withdraw only 20% and the rest will need to be invested in annuity. Ff the subscriber dies before retirement the nominee can withdraw the entire corpus and does not need to invest anything towards an annuity.

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Which is Better for Retirement – PPF or NPS?

Fri, 30 Apr 2021 06:34:47 +0000

The Buyt Desk

After retirement, along with the availability of surplus money in your bank account, you require a constant incoming stream of money. Public Provident Fund (PPF) and National Pension Scheme (NPS) are both Government-backed schemes. Both schemes provide reasonable and guaranteed returns after the tenure. However, the question is which one is a better scheme for a retired individual. The answer is not straightforward. It depends on what do you seek to achieve from your investment. Do you want to receive a big lump sum amount in your bank account when you retire or do you want a regular and fixed income in form of a pension or both? Are you ready to take a moderate risk with your capital or not? How much time, effort, and research are you ready to put into deciding your choice of investment.

Here, we compare the features of PPF and NPS to help you choose between them.

Returns: PPF has a fixed rate of interest that the Government revises every quarter. The current rate of interest is 7.1%. NPS is market-linked, thus, it does not have a fixed rate of interest. Usually, after its tenure, it provides approximately an 8 to 10% return rate.
Lock-in period: PPF has a lock-in period of 15 years. If you wish, the tenure can be extended, with or without contribution, in blocks of 5 years. Even a minor can have a PPF account. In the case of NPS, the corpus is accumulated until you reach the age of 60 years. You can extend the maturity of the scheme up to 70 years of age.
Payment: In the case of PPF, the accumulated wealth is paid at the end of the tenure unless you extend the scheme. NPS provides the accumulated wealth as a pension after you are 60 years old. If you want, you can withdraw 60% of the wealth as a lump sum amount and the remaining 40% will be paid as a pension.
Risk: PPF is a completely risk-free investment. NPS carries low to moderate risk because it is a market-associated investment. You can choose the NPS category as per your risk-taking capacity. In every category, some amount is invested in the equity market.
Inflation: PPF does not provide cushioning against inflation. Thus, every year the rate of return will be lower. In the case of NPS, some money is always invested in the equity market, which can provide safety against inflation.
Taxation: Both PPF and NPS enjoy the tax benefit provided under section 80CCE of the Income Tax Act i.e. tax deduction up to Rs.1.5 lakhs. However, NPS gives an extra tax benefit of additional tax deduction up to Rs.50, 000 under section 80CCD1(B) of the IT Act.

Diversification is a well-known fact in investment. Instead of choosing to put all your money in either NPS or PPF, you can invest some amount in both schemes. We are here to provide you complete financial information. However, for financial advice, do consult a certified financial expert.

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EPF VS NPS- How Do They Differ?

Mon, 30 Nov 2020 12:54:32 +0000

Priyanka Sambhav

To sail through retirement years, all of us must have a financial plan. We plan for all expected and unexpected expenses – like health emergencies, higher studies, marriage or vacation. But have you planned your pension? If not, then you must start now so that you have a comfortable post-work life.

Employee’s Provident Fund (EPF) and National Pension System(NPS)- are two basic investment tools which should be a part of your investment plan. If you are a salaried person, then in all likelihood you would have an EPF account. The employer and the employee both contribute to EPF, and the employee builds a corpus till he/she retires. But given the condition that jobs nowadays are on shaky ground and if you are dependent on an EPF, then a job loss would mean that the EPF may stop till you find another job. For a situation like this, one must consider a pure pension focused investment like the NPS. Both EPF and NPS promises a retirement corpus, but the approach with the investment is different. Let’s understand the key differences between the two.

How is retirement fund created in Employee’s Provident Fund (EPF)?

An employee makes a minimum contribution of 12 per cent of their salary per month. At the same time, the employer also matches the contribution and contributes up to 12 per cent of the employee’s basic wages. The employer contributes 8.33% towards employee’s EPS (Employee Pension Scheme) and the remaining 3.67% towards EPF. The Employee Provident Fund Office (EPFO) pays a quarterly interest on the PF account of an employee. The PF investment goes in debt instruments.

How is retirement fund created in the National Pension System(NPS)?

NPS is a voluntary, defined contribution scheme. You have to invest up to the age of 60 years. An investor opens an NPS account on their own through banks or eNPS portal. The minimum contribution for NPS is Rs 500 in Tier I and Rs 1000 in Tier-II accounts. There is no maximum limit for NPS account. NPS is a market-linked product, where the performance of your portfolio will depend on the fund you choose. The funds’ performance will mirror the performance of equity and debt markets. NPS offers three options of investment – equity, corporate debt and government bonds.

Maturity & Withdrawals

The EPF matures when the investor attains 58 years of age. The full amount can be withdrawn post 58. Partial withdrawals are allowed under certain circumstances such as house construction, education, medical issues, etc. but only up to a particular limit. In case of unemployment if an individual remains unemployed for one month he/she can withdraw 75% of the corpus and the balance 25% can also be withdrawn if the member remains unemployed for more than two months.

An NPS subscriber can withdraw a lump sum of 60% from their corpus when he/she reaches the age of 60 years. The remaining 40% gets invested in an approved annuity plan. NPS allows three partial withdrawals but only after three years of account opening. Withdrawals can be made for specific issues like health, education etc. These withdrawals can’t exceed 25% of your contribution.

Taxability of EPF and NPS

EPF gives you EEE (Exempt Exempt Exempt) benefit, not only the accrued interest but also the withdrawal of maturity is tax-free. The investment made up to Rs 1.50 lakh allows you Section 80C deduction of the IT act.

NPS subscribers also enjoy tax-exemption up to the limit of Rs 1.5 lakh under section 80CCD(1) of the IT Act within the overall ceiling of Rs 1.5 lakh allowed under Section 80C. In addition to this , section 80CCD 1 (B) tax-exemption of up to Rs 50,000. The employer’s contribution made towards employees’ the NPS account, will give deduction under section 80CCD (2), of up to 10 per cent of the basic salary plus dearness allowances.

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All About NPS Tier

Sun, 29 Nov 2020 09:30:22 +0000

All about NPS tier

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A Look at Government’s NPS Scheme

Mon, 23 Nov 2020 07:35:18 +0000

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NPS Archives -

How To Apply For Premature Withdrawal From NPS?

Who is Eligible for Premature Withdrawal from NPS?

Do You Need an NPS Tier II Account?

TheBuyt Team

Requirements for opening an NPS Tier II account

Benefits of an NPS Tier II account

Will I Get A Tax Benefit in the NPS Tier II Account as well?

The Buyt Desk

Difference Between NPS Tier I & Tier II Account

Taxability on NPS

New Rules of National Pension System (NPS)

The Buyt Desk

What is NPS and how does it work?

Withdrawal Rules Relaxed

Entry Age Increased

Premature Withdrawal Limit

Is Partial Withdrawal from NPS Allowed?

The Buyt Desk

NPS Tier I Withdrawal Rule

Premature Closure of NPS

5 Things You Must Know About NPS

The Buyt Desk

It is a defined contribution plan

Asset Classes offered by NPS

3.Two choices of Asset Allocation

4. Tax Advantage of NPS

5. What happens on voluntary retirement?

Which is Better for Retirement – PPF or NPS?

The Buyt Desk

Here, we compare the features of PPF and NPS to help you choose between them.

EPF VS NPS- How Do They Differ?

How is retirement fund created in Employee’s Provident Fund (EPF)?

How is retirement fund created in the National Pension System(NPS)?

Maturity & Withdrawals

Taxability of EPF and NPS

All About NPS Tier

A Look at Government’s NPS Scheme