National Pension Scheme (NPS Scheme): Interest Rate 2024, Benefits & Eligibility Criteria

By Okbima 15 Mar 2024 911
National Pension Scheme

 

The National Pension Scheme (NPS) is a government-sponsored pension scheme that aims to provide financial security to individuals during their retirement years. The interest rate for the NPS scheme in 2024 is 9% - 12%, making it a popular choice among individuals looking to build a retirement corpus.

 

What is the National Pension Scheme (NPS Scheme)?

The National Pension Scheme (NPS) is a voluntary retirement savings scheme initiated by the government of India in 2004. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) and aims to provide financial security to individuals post-retirement. 

The NPS offers two types of accounts - Tier I and Tier II, with Tier I being mandatory for government employees and optional for others. The scheme provides an opportunity for individuals to invest in equities, fixed-income securities, and government bonds, thereby offering diversification and the potential for higher returns. 

 

 National Pension Scheme Interest Rate 2024

Here is the latest National Pension Scheme Interest Rate in 2024 based on the you can invest for a tenure of 65 years.

Tenure

Invest Till 65 Years

Interest Rate

9% - 12% p.a

Investment Amount

Starting at Rs. 1000

Maturity Amount

Depends on the initial investment amount

 

Benefits of the National Pension Scheme

There are many benefits of the national pension scheme such as tax benefits, retirement income, investment options, flexibility, low-cost, etc.

  • Tax benefits: Contributions made towards the National Pension Scheme (NPS) are eligible for tax benefit under Section 80C of the Income Tax Act, up to a limit of Rs. 1.5 lakh per year. Additionally, contributions towards NPS are also eligible for an additional tax benefit of up to Rs. 50,000 under Section 80CCD(1B).

  • Retirement income: The NPS Scheme provides a regular income stream for individuals post-retirement, ensuring financial security and independence in their old age.

  • Investment options: The NPS offers a range of investment plans, including equities, corporate bonds, and government securities, allowing individuals to diversify their investment portfolio and potentially earn higher returns.

  • Flexibility: Individuals have the flexibility to choose their investment options and fund managers based on their risk appetite and financial goals. They can also switch between investment options and fund managers if needed.

  • Portability: The NPS is a portable retirement savings scheme, meaning individuals can continue their contributions even if they change jobs or move to a different location.

  • Transparency: The NPS provides regular updates on the performance of the investments, ensuring transparency and accountability in the management of the retirement funds.

  • Low cost: The NPS has one of the lowest cost structures among retirement savings schemes, with fund management charges capped at 0.01% of the assets under management.

  • Regulation: The NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), which ensures that the scheme is managed efficiently and in the best interest of the subscribers.

 

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Tax Benefits on the National Pension Scheme

The National Pension Scheme offers tax benefits under sections 80CCD (1), 80CCD 1(B), and U/S 80CCD (2).

Sections of the Income Tax Act 1961

Tax Benefits Allowed

U/S 80CCD (1)

A subscriber's individual contribution to Tier I investments is eligible for a tax deduction within the overall limit of Rs. 1.5 lakh as per section 80C.

U/S 80CCD 1(B)

Subscribers can receive deductions of up to Rs.50,000 towards Tier I contributions, in addition to the deductions available under section 80CCD (1).

U/S 80CCD (2)

Employers can receive a deduction of up to 14% for central government contributions and up to 10% for others on their contribution towards Tier I investments. This deduction is in addition to the limit applicable under section 80C.

 

Different Types of NPS Accounts

There are two main types of accounts under the NPS known as Tier I and Tier II. Tier I is the standard account, whereas Tier II is an additional optional account. The following table offers a comprehensive overview of these two types of accounts.

Particulars

NPS Tier – 1 Account

NPS Tier – 2 Account

Status

Default

Voluntary

Withdrawal

Not Permitted

Permitted

Tax Exemption

Until Rs.2 lakhs per annum

From Rs 1.5 lakh for government employees and none for others

Minimum Contribution

From Rs. 500 or Rs. 1000 per annum

Rs. 250

Maximum Contribution

No Limit

No limit

 

National Pension System v/s Atal Pension Yojana (APY)

Here is the difference between the National Pension Scheme and Atal Pension Yojana which you should look at before choosing the best retirement plans.

Parameters

NPS

APY

Type

Choice between Tier I and Tier II account

One account

Eligibility

Citizens of India & NRIs / OCIs

Residents of India

Age

Minimum – 18 years maximum – 70 years

Minimum – 18 years maximum – 40 years

Investment Particulars

No maximum limit of investing

Predetermined monthly contributions

Minimum Investment

Rs. 500 per month

Rs. 42 (Monthly) or Rs. 125 (Quarterly)

Returns

Subject to contributions made and market movements

Pre-defined returns ranging from Rs. 1,000 to Rs. 5,000

Withdrawal

Only subscribers in the Tier 2 category are able to make early withdrawals in accordance with specific regulations.

Early withdrawal may be made in the event of the contributor's death or medical illness.

Taxation Policy

Tax rebate of up to Rs. 2 Lakh

No benefits

Government Contribution

No Government contribution

Monetary contribution by the Govt.

 

How to Invest in NPS?

To open a National Pension Scheme (NPS) account in India, you can follow the below easy steps.

  • Choose a service provider: You can open an NPS account through any of the authorized service providers like banks, and financial institutions, or online platforms like eNPS.

  • Fill out the registration form: You will need to fill out the NPS account opening form provided by the chosen service provider. You will need to provide details such as your name, address, date of birth, mobile number, email ID, etc.

  • Submit required documents: Along with the filled-out form, you will need to submit certain documents like identity proof (Aadhar card, PAN card, voter ID, passport, etc.), address proof (Aadhar card, utility bills, passport, etc.), and proof of age.

  • Make the initial contribution: You will need to make an initial contribution to activate your NPS account. The minimum amount required to open an NPS account is Rs. 500.

  • Get your PRAN: Once all the documents are submitted and the initial contribution is made, you will receive a Permanent Retirement Account Number (PRAN). This PRAN will be the unique identifier for your NPS account.

 

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Eligibility Criteria for the National Pension Scheme

Below, we have mentioned the eligibility criteria for the National Pension Scheme (NPS) which you should look at before investing for your retirement.

  • Age: The NPS is open to individuals aged between 18 and 65 years.

  • Bank Account: You must have an active bank account to contribute to the NPS.

  • Aadhaar Number: Having an Aadhaar card is mandatory for enrolling in the NPS.

  • Employment Status: Both salaried and self-employed individuals can join the NPS.

  • No Existing Pension: You should not already be receiving any pension benefits from the government or any other source.

  • Residential Status: The NPS is open to Indian residents as well as Non-Resident Indians (NRIs) voluntarily.

 

NPS Scheme Withdrawals

The rules regarding withdrawals in the NPS provide options for partial and premature withdrawals, as well as various choices for withdrawals upon reaching maturity. The PFRDA is responsible for overseeing the NPS and implementing withdrawal policies.

Current rules:

  • Individuals are allowed to take out a lump sum of up to 60% of their NPS savings once they turn 60 years old.

  • NPS subscribers have the option to withdraw 60% of their corpus over 15 years, from the age of 60 to 75, in monthly, quarterly, half-yearly, or annual installments.

  • The remaining 40% of the corpus is allocated for purchasing annuities. Should the corpus amount to less than Rs 2 lakh, the full amount can be withdrawn.

  • NPS tier 1 account holders are allowed to make up to three partial withdrawals after investing for 3 years.

  • Nevertheless, withdrawals must be separated by a minimum of 5 years.

  • Leaving the NPS before reaching the superannuation age requires a waiting period of 10 years. If a contributor decides to discontinue their contributions, they are only allowed to withdraw 20% of their total amount, with the remaining funds required to be invested in annuities.

 

Read More:

Aam Aadmi Bima Yojana (AABY) - Application, & Benefits

Senior Citizen Saving Scheme (SCSS) 

Pradhan Mantri Vaya Vandana Yojana Scheme (PMVVY)

PLI Interest Rate 2024: PLI Scheme & Eligibility

 

Conclusion 

In conclusion, the National Pension Scheme (NPS) offers a viable retirement savings option for individuals looking to secure their financial future. With tax benefits, flexible contribution options, and a choice of investment avenues, the NPS provides a comprehensive solution for retirement planning. You can contact “Our Experts” to buy the best retirement plans now.

 

FAQs

If the subscriber's PRAN is frozen or inactive when making a withdrawal, the request will be treated as a normal withdrawal and processed accordingly.

Indeed, both Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) are eligible to open National Pension System (NPS) accounts.

Certainly, individuals are allowed to invest in both NPS and APY without any restrictions.

Of course! You are allowed to invest in multiple retirement programs.

If the subscriber passes away, the nominee will inherit the total pension wealth. If no nominee has been named, the legal heir of the subscriber will receive the wealth. In either scenario, there is no need to buy an annuity or monthly pension plan.

Sorry, you are only allowed to withdraw a portion of your contributions from your NPS account, specifically up to 25%. This can only be done for specific reasons such as children's wedding or education expenses. Withdrawal due to unemployment is not permitted.

After opening an account with the National Pension System, there is a lock-in period of five years. Following this, individuals have the option for a 'premature exit' before the age of 60. In this case, they must allocate 80% of their corpus towards purchasing an annuity, with only 20% available for withdrawal. This 20% withdrawal is tax-exempt. An annuity provides a fixed payment for the individual's lifetime, typically distributed monthly as a pension.

Any Indian citizen who is between the ages of 18 and 65 on the date of application can invest in NPS. Individuals or employee-employer groups can become members of the NPS. OCI (Overseas Citizens of India), PIO (Person of Indian Origin) card holders, and HUFs, on the other hand, are ineligible to register an NPS account.

The National Pension System (NPS) is an initiative by the Government of India to provide financial security to elderly Indian citizens. However, the government does not make direct contributions to individual NPS accounts. Individuals can contribute to their NPS accounts under the "all citizens of India" model, while employee-employer groups can make contributions under the corporate model.

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