Functions of PFRDA (Pension Fund Regulatory & Development Authority)

June 5, 2022

The Government of India has initiated many programs for senior citizen over the years. These programs aim at fixing monthly pension schemes after retirement. In 2003, Parliament passed the Interim Pension Fund Regulatory and Development Authority Bill. The goal was to promote, regulate, and develop a pension system in the country.

After the preparation of the final system in 2013, the PFRDA came into being. It was an improved version of IPRDA and is a permanent act. It is the regulatory body for supervising the National Pension Scheme.

Earlier, the National Pension Scheme by PFRDA was for government employees only. But it was later extended to all Indian citizens. This includes non-resident Indians (NRI) and self-employed citizens.

Pension Fund Regulatory and Development Authority and its Functions

The PFRDA is the pension regulator for the National Pension Scheme. It functions towards the promotion and development of pension schemes. The Central Autonomous Body (CAB) has legislative, executive, and judicial powers. It is like other financial sector regulators in the country. These bodies include SEBI, RBI, IRDA, etc. It is a quasi-government organisation. The Indian government provides support, but the management is private.

The regulatory body has its headquarters in New Delhi. There are many regional offices across the country. A list of PFRDA functions is as follows:

Promoting pension schemes to secure the old age financial requirements of retired individuals
Regulating the pension schemes that fall under the PFRDA act (NPS and Atal Pension Yojana)
Protecting the interests of pension fund subscribers
Governing and supervising Tier-1 and Tier-2 accounts of the NPS
Registering and regulating intermediaries like Central Record-Keeping Agency (CRA), Pension Fund Managers, etc.
Training intermediaries to familiarise and educate people on the importance of pension funds
Educating stakeholders and the general public about the benefits of PFRDA NPS
Approving schemes and formulating the guidelines for managing pension fund corpus
Establishing a grievance redressal mechanism
Addressing grievances on the various pension schemes in the country
Regulating the regulated assets

Online Services of PFRDA

It is easy to apply for NPS both offline and online. The Pension Fund Regulatory and Development Authority (PFRDA) takes care of the same. The regulatory organization offers many internet services. These services encourage professionals to apply for different NPS by PFRDA. They include:

Pension Fund account opening through NPS
Processing contributions to the Permanent Retirement Account Number (PRAN).
Activating Tier-2 account
Updating subscribers’ personal information
Changing investment strategy
Changing the PFRDA pension arrangements
Downloading and accessing transaction statements through PFRDA NPS login
Processing withdrawal or departure requests
Filing complaints and queries
Printing e-PRAN and other documents

Conclusion

The National Pension Scheme is an initiative by the Government of India. It aims at facilitating a regular income for all subscribers after retirement. The Pension Fund Regulatory and Development Authority (PFRDA) governs the NPS. The PFRDA offers National Pension Scheme through four types of accounts. They are All Citizen Model, Corporate Model, Government Sector, and Subscribers accounts.

Featured Posts

Old Pension Scheme Vs New Pension Scheme! What are the key differences between them?

National Pension Yojana – A Retirement Plan For All!

National Pension System: A Smart Retirement Planning Option For Indians

How to Save Tax with NPS? Explained in this blog.

NPS Scheme Benefits: An Attractive Option for Retirement Planning

Back to Blog

Benefits of Joining Corporate National Pension System (NPS) – KFintech

June 4, 2022

The National Pension Scheme, introduced by the Government of India in January 2004, aimed to provide pensions to government employees after retirement. Until 2009, the scheme was reserved for government employees only. For non-government employees to enjoy the benefits of the NPS, the NPS Corporate Model was launched in December 2011. Today, the general public in the age group of 18 to 60 years can invest in Tier-1 and Tier-2 accounts of the NPS.

The Corporate National Pension Scheme is designed for all corporates, including private companies, CPSEs, PSUs, etc. Employers can offer the scheme to employees, along with the benefits of Gratuity, Provident Fund, Superannuation, or any other pension funds.

Similar to Employees Provident Fund (EPF), the corporate model of NPS enables both employees and employers to contribute periodically. To build a corpus that results in retirement benefits for NPS employees, 10% of the employee’s salary is deducted for contribution to the scheme. The employer also makes an equal contribution.

Corporate NPS Benefits

Easy Adoption

An employer can introduce NPS to its employees under the scope of their employee-employer relationship. The scheme can be mandatory or voluntary.

Low Cost

The administrative costs of NPS are much lesser than other investment options. This is a huge benefit for subscribers. The employer does not need to establish and maintain a Trust or indulge in record-keeping activities regarding the pension for NPS employees. There is also no set-up or maintenance cost.

Flexibility

There are no fixed rules for NPS employee and employer contributions. The employee or the employer can select a pension fund manager. The employees can decide the proportion in which they would like to invest in debt or equity from the options provided. The employees can also choose to leave the allocation in auto mode, wherein the equity exposure reduces as the age of the subscriber increases.

No Obligation

The corporate is only a facilitator between the subscriber and the pension fund manager. All responsibilities and obligations to maintain the account are with the employee.

Tax Benefit

Corporate NPS allows senior employees to claim deductions beyond the limit of ₹1,50,000 under Section 80C of the Income Tax Act. The cost-effective investment option allows exposure to equity as per the employee’s age to build a higher retirement corpus with low fund management charges.

Furthermore, Corporate NPS provides triple tax benefits to middle and junior employees. They can opt for equity exposure up to 75%. The scheme is also a systematic investment plan where employees can start investing with only ₹500.

There is also an NPS employer contribution tax benefit. Employers can record the amount they contribute to NPS as a Business Expense in their Profit & Loss accounts to claim the benefits.

NPS employee death benefits

While the purpose of the National Pension Scheme is to provide monetary support to the employee after retirement, it provides certain death benefits too. In the case of the unfortunate demise of the subscriber before retirement, the nominee can withdraw the money accumulated in the corpus.

Who Can Join Corporate NPS?

Under the Corporate model, all Indian citizens are entitled to apply for the NPS.
The age of the subscriber should be between 18 to 60 years on the date of the application.
The company you are working with should be registered under the corporate model.

EPF Vs. NPS

Many argue that the EPF and NPS are similar. However, there are major differences that you must know of to decide which one is more suitable for you.

The Employee Provident Fund is a mandatory retirement savings scheme, whereas the Corporate National Pension Scheme is a voluntary retirement savings fund. The employee’s contribution to EPF is eligible for tax benefits of up to ₹1,50,000 under Section 80C of the Income Tax Act. On the other hand, the NPS Corporate Model permits employees to claim deductions of ₹50,000 under Section 80CCD (1B) after exhausting the ₹1.5 lakh limit.

Which Companies Can Offer Corporate NPS to Their Employees?

A company must be registered under the Companies Act, 2013, to offer NPS employee retirement benefits. Registered co-operative societies can also make contributions to the employees’ NPS. The corporate model is available for government and affiliated organizations apart from public sector companies. Moreover, proprietary concerns, registered partnership firms, and some foreign companies can also benefit from the NPS corporate model.

Summing Up

The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a separate model of pension schemes for employers. It is available for corporate entities, public sector undertakings, central public sector enterprises, etc. The model, known as the NPS Corporate Model, enables corporates to adopt NPS as a retirement benefits scheme for the employees.

Featured Posts

Old Pension Scheme Vs New Pension Scheme! What are the key differences between them?

National Pension Yojana – A Retirement Plan For All!

National Pension System: A Smart Retirement Planning Option For Indians

How to Save Tax with NPS? Explained in this blog.

NPS Scheme Benefits: An Attractive Option for Retirement Planning

Back to Blog

Are NPS Returns and Maturity Amount Taxable?

June 3, 2022

The National Pension System or NPS is a voluntary retirement planning scheme available for the citizens of India. This scheme was launched by the Government of India in January 2004 to help Government employees create a corpus for their retirement. However, in 2009, the NPS scheme was opened to all sections.

You can invest in the NPS to create a corpus and ensure a regular stream of income after your retirement. You can also receive certain tax benefits under Section 80C of the Income Tax Act of 1961 by investing in NPS. But many people are sceptical about the tax exemptions available on the NPS investments and returns.

In this article, we will discuss in detail the NPS, the expected rate of return on NPS investments, and whether NPS returns on maturity are taxable or not. Let’s get started with what NPS is first.

What is NPS?

As mentioned, NPS is a government-backed retirement planning tool in which you can invest your money to create a corpus for your retirement. It is a market-linked investment instrument, and that is why your money invested in NPS gets invested in a combination of debt and equity. A professional pension fund manager manages the money invested in the NPS.

As an investor, you can choose between the Auto Mode and Active Mode. When you choose the Active Mode, you have the freedom to manage your investments on your own by switching between debt and equity. However, if you choose the Auto mode, your pension fund manager automatically switches between securities to ensure maximum returns on your investments.

As per the current NPS rules, you can start investing in NPS by contributing at least ₹6000 every financial year (minimum ₹500 per contribution) till its maturity, i.e., your retirement age. At the time of maturity, you can withdraw up to 60% of the accumulated corpus, and the remaining amount will be used to provide you with a regular monthly income after your retirement.

When you invest in NPS, you have the flexibility to choose between seven pension fund managers and a Tier I or Tier II scheme. Depending upon the type of scheme and fund manager chosen by you, your NPS return rate may vary between 9 to 12 percent. You can use our online NPS return calculator to determine approximate long-term returns on your NPS investments.

Types of NPS Accounts

There are two types of NPS accounts – Tier I NPS account and Tier II NPS account. While a Tier I account is mandatory if you want to invest in NPS, Tier II is a voluntary savings account where you can park your money just like a savings bank account. Unlike a Tier I account,a Tier II account offers you more flexibility in terms of withdrawal.

While a Tier I account comes with a minimum lock-in period of three years, a Tier II account has no such provisions. You can invest and withdraw your money from a Tier II account anytime without any restrictions. NPS Tier II return calculator works in the same way as it does for NPS Tier I account.

Tax Provisions on NPS Returns

By investing in an NPS Tier I account, you can claim tax deductions of up to ₹2 lakh every financial year under various sub-sections of Section 80C of the Income Tax Act. However, no tax benefits are available forNPS Tier II accounts since they act as only a savings scheme and don’t necessarily help in retirement planning.

Now, let’s talk about whether NPS returns on maturity are taxable or not. Since NPS qualifies under the Exempt-Exempt-Exempt (EEE) category investment plan, its returns are tax-free for investors. To qualify for the EEE category, an investment instrument must fulfil these conditions:

The amount of the investment should be available for tax deductions
The income earned from the investment should be exempted from income tax
No tax should be applicable on maturity proceeds

However, there is a little catch. As per existing NPS rules, up to 60% of the accumulated corpus can be withdrawn at maturity. The remaining amount is used to invest in annuities to provide you with a regular stream of income after your retirement. While no tax is applicable on the withdrawal of money upon maturity, money received as an annuity after your retirement is added to your taxable income.

For example, if the total accumulated corpus at maturity is ₹10 lakhs, you can withdraw up to 60%, i.e., ₹6 lakhs as non-taxable income. The remaining 40%, i.e., ₹4 lakhs, would be used to provide you annuity income, which could attract income tax.

To Conclude

NPS is a useful retirement planning tool. You can invest in it to get healthy returns. NPS rate of return is usually higher than most fixed-income instruments, such as Fixed Deposit and Public Provident Fund (PPF). Since NPS qualifies as an EEE-category investment instrument, the investments made in it, along with the maturity benefits, are non-taxable.

To know how NPS can help you build your retirement, click here.

Featured Posts

Old Pension Scheme Vs New Pension Scheme! What are the key differences between them?

National Pension Yojana – A Retirement Plan For All!

National Pension System: A Smart Retirement Planning Option For Indians

How to Save Tax with NPS? Explained in this blog.

NPS Scheme Benefits: An Attractive Option for Retirement Planning

Back to Blog

How Does NPS Work for Government Employees?

June 2, 2022

The National Pension Scheme (NPS) is one of India’s most popular retirement benefit plans. The Pension Fund Regulatory and Development Authority of India (PFRDA) is responsible for regulating the NPS scheme. Investing in this plan secures your retirement while offering tax benefits under Sections 80C and 80CCD. There is also a lock-in period with the NPS, but withdrawal is permittedunder certain circumstances. The NPS rules and regulations for government and non-government employees differ significantly. Here is everything you need to know about NPS if you work for the government.

NPS Account Opening Online Rule

If you are a Central Government employee, NPS is mandatory for you if you joined the service on or after 1^st April 2004. However, this condition does not apply to you if you work under the armed forces. NPS is also mandatory for State Government employees (except those employed under the West Bengal government).

As soon as you join the service, your employer wants you to submit an NPS application form to the Pay and Accounts Officer (PAO) and Drawing and Disbursing Officer (DDO). The enrolmentis then processed through the nodal officer.

NPS Contribution for State Government Employees and Central Government

Government employees can contribute to online NPS at the rate of 10% of the salary plus dearness allowance. The employer will make a matching contribution in this case. However, the employer contributions rates have been revised and increased to 14%. The rate revision was made effective from 1^st April 2019.

Benefits of NPS for Central Government Employees:

Higher returns:

The salary you contribute towards NPS is invested in equity, alternative investment funds, corporate bonds, and government securities. It provides safer and better returns than any other scheme available due to the diversification of money in different asset types. The NPS interest rate can range between 9% and 12%.

Tax benefits:

NPS allows you to claim tax advantage under section 80C of the Income Tax Act. You can claim tax exemptions of up to ₹1.5 lakhin a financial year.

NPS Withdrawal Rules:

Premature exit before the age of 60 years:

If your accumulated corpus is equal to or less than ₹2.5 lakh, you will be provided with a lump sum payment.

If you have an accumulated corpus of more than ₹2.5 lakh, you must invest at least 80% of it in an annuity plan. The remaining 20% will be paid in one single sum to you.

Normal exit after the age of 60 years:

You are allowed to withdraw the lump sum amount if the accumulated corpus is less than or equal to ₹5 lakhs.

In case the corpus is over ₹5 lakhs, you must invest at least 40% of it in an annuity plan. The remaining 60% will be paid as a lump sum.

To Sum It Up

NPS is mandatory for all government employees. In case you work in the private sector, you can also start contributing to NPS and enjoy the benefits of relatively safer returns.

Featured Posts

Old Pension Scheme Vs New Pension Scheme! What are the key differences between them?

National Pension Yojana – A Retirement Plan For All!

National Pension System: A Smart Retirement Planning Option For Indians

How to Save Tax with NPS? Explained in this blog.

NPS Scheme Benefits: An Attractive Option for Retirement Planning

Back to Blog

Benefits & Features of Investing in NPS

June 1, 2022

The National Pension System (NPS) is a voluntary pension system in India. Its objective is to make your retired life comfortable by offering you a regular income. NPS encourages subscribers to get into the habit of saving for life post-retirement. The pension funds registered under NPS are regulated by the Pension Fund Regulatory and Development Authority (PFRDA).

The National Pension System is also a tax exempt-exempt-exempt (EEE) instrument like Employee Provident Fund (EPF) and Public Provident Fund (PPF). Many professionals, including employees of the private and government sectors, are attracted to the NPS tax-saving scheme. It is because the entire amount in your pension fund is exempt from tax on maturity, and you are not liable to pay any taxes on the whole pension withdrawal amount.

Benefits of Investing in NPS

Flexible

NPS is a flexible retirement savings scheme. Subscribers have a range of investment options and pension funds to choose from. They can plan the growth of the investments reasonably and track the growth of the pension corpus. Moreover, subscribers can switch between different fund managers and investment options conveniently.

Well Regulated

The PFRDA regulates the NPS. The investment norms are transparent. Moreover, the NPS Trust monitors and reviews the performance of fund managers regularly. NPS does not have high account maintenance costs. In fact, it is the lowest among similar pension products available to investors.

When you are saving for long-term returns, administrative and account management costs play a vital role. If they are high, they can eat up a significant amount from the corpus during the 30 to 40 years investment period.

Death Benefit

One of the benefits of NPS investment is that it takes care of your family even after your demise. Your spouse or children may live for a good number of years after you are no more. To help you meet your financial obligations after death, NPS allows you to choose a pension plan that continues to pay a monthly pension to your spouse. Your nominee/legal heir can also withdraw the corpus from your pension account.

Automated Risk Reduction with Age

NPS has a built-in risk reduction strategy. So, it protects your retirement corpus from market volatility as your retirement date is nearing. The funds in your NPS account are exposed to debt and equity investments. When you opt for the auto asset allocation model, you determine a starting equity-debt mix as per your risk appetite. After you cross 35 years of age, your exposure to market-linked products is reduced with more allocation toward FD-like instruments.

Portable

When you change your job or relocate to a new city, you can port your NPS. It is a hassle-free arrangement for individual subscribers. So, there is no need for you to leave behind the corpus you build.

Tax Benefit

The tax benefit on NPS is one of the key reasons for its popularity. The scheme allows you to claim deductions worth ₹1.5 lakh under Section 80C. Moreover, if you’ve exhausted the limit in Section 80C with other investments, such as ULIP, you can still claim deductions on your NPS investment. Section 80CCD (1B) lets you claim a deduction of ₹50,000. Thus, the National Pension Scheme tax benefit is ₹2 lakhs cumulatively. The pension income, partial withdrawals, and maturity withdrawals are also tax-free.

However, it is vital to know that there are no NPS tier 2 tax benefits. Your withdrawals from this account are taxable as per the income tax slab rate you fall under.

Ease of access

Applying to the NPS scheme for tax benefits is easy. You can either submit an online application form or visit any registered POP (Point of Presence) to obtain the registration form. KFintech has tie-ups with hundreds of POPs and thousands of corporates in India, making the account opening process smoother. You can also make further contributions and manage the account online.

Summing Up

If you want to live a stress-free, happy life after retirement, an investment in NPS is a great idea. You can build a retirement corpus and claim tax benefits for NPS under 80CCD. Features like flexibility, portability, ease of use and access, built-in risk reduction strategy, and several tax benefits make it an attractive retirement saving tool.

Featured Posts

Old Pension Scheme Vs New Pension Scheme! What are the key differences between them?

National Pension Yojana – A Retirement Plan For All!

National Pension System: A Smart Retirement Planning Option For Indians

How to Save Tax with NPS? Explained in this blog.

NPS Scheme Benefits: An Attractive Option for Retirement Planning

Back to Blog

Should You Invest in the NPS?

May 31, 2022

What is NPS?

The NPS is essentially a market-linked retirement planning tool in which you can invest to create a corpus for your retirement. When you invest in the NPS, your money gets invested in market-linked securities, including equities, debt, or both, and a professional pension fund manager manages these investments.

The NPS investors can choose between the Active Mode and Auto Mode. In the Active Mode, the investors can manage their investments themselves by switching between debt and equity. In the Auto Mode, the fund manager has the complete freedom to handle the investments on behalf of investors.

As per the current rules, the minimum investment in NPS is ₹500 every year. At your retirement age, you can withdraw a certain percentage of the accumulated corpus, and the remaining amount will be used to provide you with a regular income after your retirement. Depending upon the scheme chosen by you, you can get long-term returns between 9 to 12 percent by investing in NPS.

Why to Invest in NPS?

As you can see, the primary objective of the NPS investment scheme is to provide you with tax-free annuity benefits at the time of your retirement. You can invest in the NPS to get good returns from the market and create a corpus for your retirement. It also provides tax benefits of up to ₹50,000 under Section 80C of the Income Tax Act.

Here are a few reasons why we should invest in NPS:

It works as a source of earnings after your retirement: As we’ve mentioned before, NPS allows you to withdraw a percentage of your accumulated corpus as you approach retirement. The remaining amount is used to provide you with annuity benefits in the form of regular income after your retirement. You can use these earnings to meet your daily expenses when you don’t have any other source of income.

It is a low-risk investment instrument: Although NPS invests in market-linked securities, it entails lower risk than other money-market instruments, such as stocks, mutual funds, etc. NPS is a government-owned scheme, and hence, the equity cap ranges between 50 to 75 percent. This percentage keeps on decreasing as an investor approaches their retirement, making it a relatively safer instrument.

Guaranteed returns: Although a portion of the NPS is invested in equities and doesn’t offer assured returns, the overall returns from the scheme are guaranteed. Moreover, the returns offered by NPS are higher than other fixed-income instruments, such as Fixed Deposits and Public Provident Fund (PPF).

Are There Any Limitations?

While NPS is a useful retirement planning scheme, it has a few limitations. You should not invest in the NPS if you want to invest in 100% equities or if you do not want to lock your funds for a long period. Moreover, NPS offers a fixed income for the lifetime along with a lump sum on maturity.

The Final Words

NPS is a very useful tool to create a corpus for your retirement and ensure a regular income during your golden years. It also offers considerable tax benefits. However, you should not invest in the NPS only for tax benefits. Also, you should keep its limitations in mind while deciding to invest in it.

Featured Posts

Old Pension Scheme Vs New Pension Scheme! What are the key differences between them?

National Pension Yojana – A Retirement Plan For All!

National Pension System: A Smart Retirement Planning Option For Indians

How to Save Tax with NPS? Explained in this blog.

NPS Scheme Benefits: An Attractive Option for Retirement Planning

Back to Blog

What is the National Pension Scheme (NPS)? Does it Help in Saving Tax?

May 27, 2022

Most people plan for what they wish to do in the near future. While that vision may not be not crystal clear, they have a vague idea of what they would like to do, five or ten years down the road. For instance, they know where to buy a house, which car to buy, which school the child has to go to, etc. However, the one aspect that many don’t consider is retirement planning. With inflation always being a consideration, it can be difficult to cope with retirement if you don’t have a proper plan.

One of the first steps to take on your journey towards retirement planning is understanding what the NPS scheme is. The National Pension Scheme is one of many vehicles that can help you reach your retirement goals and set you on the right track.

What is the National Pension Scheme?

The National Pension Scheme, offered by the Government of India, is a social security investment initiative. Employees from the private sector, state government, central government, as well as self-employed professionals can apply for the pension program.

The objective of the scheme is to encourage savings or contributions in a pension account periodically during employment. Subscribers can withdraw a percentage of the corpus after retirement and use it to meet their expenses. An NPS account holder receives the remaining amount as a pension every month after retirement.

The NPS scheme is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Initially, it was only for Government employees. However, the PFRDA now offers it to all resident and non-resident Indians on a voluntary basis.

Employees working in the private sector can significantly benefit from the NPS scheme since it gives them a regular pension after retirement. Moreover, employees can port their NPS account across jobs and locations and avail of tax benefits under Section 80C and Section 80CCD.

Who Should Apply for the NPS Scheme?

Anyone who wants to start planning early for their retirement but has a low-risk appetite should invest in the NPS. When you retire from your jobs, especially if you are working in the private sector, the regular pension you receive each month after retirement will be a boon.

Having a systematic investment like the NPS can significantly change how you live life post-retirement. That being said, salaried individuals can consider the scheme to make the most out of their 80C deductions.

What are the Tax Benefits of NPS?

After you learn what an NPS account is, you must study the various tax benefits it offers. You are eligible for deductions against NPS investments in your Tier-1 account. So, make sure you use the right NPS account for your investments and tax deductions.

Section 80C tax benefits

The National Pension Scheme is an important investment that you can invest in for tax savings under Section 80C of the Income Tax Act. The maximum deduction you can claim under this section is ₹1.5 lakhs. If you have not made any other eligible investments, you can invest the entire amount in NPS and claim the deduction.

Section 80CCD (1B) tax benefits

This section offers additional tax benefits for NPS investors. It permits deductions of up to ₹50,000 for your investments. Since the deduction is in addition to the deductions you can claim under Section 80C, the total deductions you can claim after investing in NPS is ₹2 lakhs. You can do this by claiming ₹1,50,000 under Section 80C and ₹50,000 under Section 80CCD (1B).

Section 80CCD (2) tax benefits

This tax benefit is eligible for employer contributions. Therefore, it is suitable for salaried individuals and not for self-employed individuals. Private sector employees can claim 10 per cent of their salary under this section, whereas government employees can claim 14 per cent.

Here’s an example to help you understand the tax deductions a private-sector employee can claim with NPS.

Basic Salary	₹7,00,000
Section 80C Deductions	₹1,50,000
Section 80CCD (1B) Deductions	₹50,000
Section 80CCD (2) – 10%	₹70,000
Total tax deductions you can claim	₹2,70,000

How much to invest in the National Pension Scheme for tax benefit?

A self-employed or salaried individual can claim tax deductions of up to ₹50,000 from their contributions to the NPS account in a financial year. Section 80C of the Income Tax Act permits a maximum deduction of ₹1,50,000. Even if you have exhausted this limit, the National Pension Scheme lets you claim an additional deduction of ₹50,000. As a result, you can claim total deductions worth ₹2 lakh on your income tax liability.

Summing up

If you want to plan early for your retirement and your risk appetite is low, consider investing in an NPS scheme. Its tax benefits can help reduce your taxable income quite a lot. However, don’t consider tax deductions as the only benefit of the investment. A National Pension Scheme helps in building a corpus for your retirement with its low cost and flexibility.

Featured Posts

Old Pension Scheme Vs New Pension Scheme! What are the key differences between them?

National Pension Yojana – A Retirement Plan For All!

National Pension System: A Smart Retirement Planning Option For Indians

How to Save Tax with NPS? Explained in this blog.

NPS Scheme Benefits: An Attractive Option for Retirement Planning

Back to Blog

How many mutual funds make a good Portfolio

If you are investing in mutual funds, you may have asked or been told about diversification and the number of mutual funds you should own to make your portfolio stronger, and safeguard your investments from sudden market risks.

It is necessary to ensure that your investment portfolio is diverse and you don’t have all your eggs in one basket. At the same time, it is also true that too much diversification can prevent you from making high gains. This gives rise to the question of how many mutual funds you should have and how much is too much.

Diversification vs. overdiversification

Diversification of investments is done with the aim of spreading the risk out across a number of assets. If you have invested too much in the stocks of a single company, your investment is at greater risk, because if the company does not perform well, it’s share prices drop and so will your investments. To mitigate this risk, you should diversify your investments and invest in multiple companies, so as to ensure that even if one company does not perform well, the investments in the other companies helps you overcome that loss.

However, investing in too many companies can result in you not being able to make the most of your investments. Even if one of your investments does really well, you will not be able to see a great difference in your corpus because your investments are spread thin and the investment in any one company is bound to be smaller. It is usually suggested that you keep your investments diversified across industries, but limited to a few companies per industry.

How many mutual funds should you own?

Since there are several types of mutual funds, let us talk about each kind of mutual fund specifically.

Large-cap equity mutual funds make their investments specific to shares of large-cap companies. Investing in one large-cap mutual fund that is well researched and chosen diversifies your investments enough that a second one is not strictly necessary, but can be an option. Owning multiple large cap funds increases the chance that there is a significant overlap in the shares owned by these funds and does not really guarantee more diversity in your holdings.

Mid-cap equity mutual funds, as the name suggests, diversify their investment across companies belonging to the medium capital spectrum. These companies have much higher growth potential compared to companies belonging to the large capital spectrum. However, the risk involved with mid-cap mutual funds is also considerably higher.

There exist a lot more mid-cap companies than there are large-cap ones. This means that even if you invest in multiple mid-cap mutual funds, the chances that there is significant overlap in your investments is smaller. This means that you have more options to invest in, but only invest in mid-cap funds after you have throughly researched them and are confident in their prospects.

Though the high potential return can increase appeal for these funds, remember that there is a higher risk factor associated with these funds, which may be detrimental for your overall portfolio if things do not go your way. For mid-cap funds too, you should limit yourself to two funds only.

Small-cap mutual funds, as you can probably guess by now, invest in small-cap companies. Investing in them is a high risk, high reward strategy. If they do well, you stand to earn extremely high returns, but if they do not, you could lose out on a lot of your initial capital. Given the number of companies that fall in this bucket, the chances of your investments overlapping are smaller and the reason you should limit yourself to approximately two of these is more because of the risks associated with them. Again, only invest in small cap funds after a lot of thorough research.

Debt Mutual Funds are investment schemes that allocate your funds to bonds and other similar market instruments. These are considered very safe and low risk investment which means that the returns are also low. You can probably invest in one or two of these as well, but investing in more than that means lower returns overall.

Sectoral Mutual Funds allocate your funds to companies from one particular industry. This is very similar to investing in only one company, since if the industry as a whole sees a downturn, your investment in it will also take a hit. These funds are only a good option if you happen to be an expert in, or know a lot about, that particular industry. The number of sectoral mutual funds you invest in depends on the industries you are familiar with. If you’re not sure about a particular fund or industry, it is best pass on these them.

Though there is no exact number that is right for everyone, anywhere from six to ten mutual finds is usually the number of funds you want to be invested in. But this, by no means, set in stone. You could invest in more or less depending on multiple factors, such as your risk tolerance, your expected returns, your knowledge of particular industries etc. You should always ensure that the funds you are investing in are of different types, rather than funds with different names but similar outputs. As always, please research thoroughly and consult your financial advisor before making any financial decisions.

Featured Posts

How Does Mutual Fund Software For Distributors Impact Their Business?

9 Reasons Why MFDs Should Use Mutual Fund Software in 2025

5 Best Practices for Mutual Fund Distributors to Follow

The Dynamic Landscape of Mutual Fund Software | Explained

Factors to look for while investing in Mutual Funds for Beginners

Back to Blog

Learn How to Open a National Pension System (NPS) Account – Online or Offline?

May 26, 2022

Are you wondering how to open a National Pension Scheme account? This article has all the information you’ll need to understand how to open an NPS scheme online and offline.

What is the National Pension Scheme?

National Pension Scheme or NPS is a contribution-based pension program offered by the Central Government. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The objective of the scheme is to provide a retirement fund to all salaried and self-employed professionals.

How to Start an NPS Scheme?

There are two ways to open an NPS account:

Online, by logging into the KFintech NPS website.
Offline, by visiting a post office or a bank branch in your town or city.

How to Open a National Pension Scheme Account Online?

To open an NPS account online, you need to visit the KFintech NPS website. There are two routes through which you can register yourself for an NPS account. The first is Aadhaar-based verification, and the second is PAN-based verification.

Make sure your Aadhaar number is linked to your mobile number since you will receive an OTP to complete KYC authentication. In case you’re using your PAN Card, ensure that the details are linked to your savings account. Your bank will complete the KYC and application process on your behalf.

Go to KFintech NPS website and click on ‘Join NPS’
Fill in the required details and create the account
Fill up all the mandatory details online
Upload supporting documents
Make the initial contribution while opening the account (Minimum amount of Rs.500 for Tier I and Rs.1000 for Tier II)

How to Start an NPS Scheme Offline?

If you don’t want to proceed with the online NPS account opening procedure, you can visit the nearest Point of Presence Service Provider (PoP-SP) to obtain the registration form. This service provider must be registered under PFRDA. The PFRDA has appointed certain financial institutions and banks to offer NPS scheme services to subscribers.

These PoPs offer NPS-related services, including subscriptions to the scheme and changing fund managers. To apply for the scheme, you need to fill out the application form and complete KYC verification by providing documents, such as address proof, Voter ID, PAN Card, Aadhaar Card, etc.

In case you are wondering how many NPS accounts can be opened, the answer is one. It is your choice whether you want to open the account online or offline, but in all, you can only have one NPS account.

Final words

The National Pension Scheme is one of the first vehicles an individual should invest in if they want to plan early for their retirement. The scheme is flexible, has lower risk levels, provides assured returns, and offers many tax benefits under Section 80C and Section 80CCD of the Income Tax Act. Interested individuals can complete the formalities to open an NPS account online or offline.

Featured Posts

Old Pension Scheme Vs New Pension Scheme! What are the key differences between them?

National Pension Yojana – A Retirement Plan For All!

National Pension System: A Smart Retirement Planning Option For Indians

How to Save Tax with NPS? Explained in this blog.

NPS Scheme Benefits: An Attractive Option for Retirement Planning

Back to Blog

NPS Investment – A Step Towards Retirement Planning

May 25, 2022

Most people dream of living a peaceful and stress-free life after retirement. To achieve this dream, you must plan your retirement early on. Retirement planning involves the allocation of savings to manage post-retirement financial goals.

One needs time to build a substantial corpus, and you should possibly plan for at least 20-30 more years after retirement for you and your family’s financial security. You need to ensure a steady source of income, which is why NPS is the best retirement option. This pension plan offers financial stability by providing a regular income source after you retire from your professional service.

What is NPS?

NPS or National Pension Scheme is a social security initiative by the Indian Government to encourage individuals to build a retirement corpus. The program is open to all Indian citizens within the age bracket of 18 years to 60 years. A person can apply for the scheme if he or she is 60 years old at the time of application submission.

There are several NPS benefits for employers, employees, and the self-employed. If employees and self-employed individuals deem fit, they can subscribe to the NPS independently. But employers can also offer PF or NPS to their employees.

The NPS has a minimum contribution of at least ₹1000 per year, but it is advisable to contribute more to enjoy a reasonable pension post-retirement and make the most of the NPS retirement benefits.

Is NPS a Good Option for Retirement?

The many NPS employee retirement benefits listed below will help you decide whether you should invest in the scheme or not.

NPS is an affordable and transparent scheme. You can check your investment value regularly.
A significant portion of the NPS contribution is allocated to equity schemes. Equities provide higher returns than traditional tax-saving products like PPF. NPS has an interest rate of 9% to 12% and is best suited for individuals who wish to accumulate funds and live a financially secure life after retirement.
If the performance of the investment is not at par with your expectations, you can change the pension scheme under NPS.
Tax deductions are another NPS benefit that an individual can enjoy. The NPS employer contribution and employee contribution are eligible for tax deductions of up to ₹1,50,000 under Section 80C of the Income Tax Act.
The scheme is voluntary and lets subscribers contribute as and when convenient during a financial year.

Withdrawal Rules After 60 Years of Age

What most people don’t know is that you are not eligible to withdraw the entire NPS contribution after your retirement. It is mandatory to leave at least 40% of the corpus, which is used to give you a monthly pension. You can withdraw the remaining 60%, and fortunately, it does not add to your tax liability.

Conclusion

The retirement benefits for NPS employees are plenty. They include higher returns, tax benefits, premature withdrawals, flexibility, and ease of use. The scheme is regulated by the Pension Fund Regulatory and Development Authority of India, which means that there is transparency and reliability for the investors.

Featured Posts

Old Pension Scheme Vs New Pension Scheme! What are the key differences between them?

National Pension Yojana – A Retirement Plan For All!

National Pension System: A Smart Retirement Planning Option For Indians

How to Save Tax with NPS? Explained in this blog.

NPS Scheme Benefits: An Attractive Option for Retirement Planning

Mutual Fund Solutions

Global Business Solutions

Corporate Registry

Private Wealth Management

National Pension System

Alternatives

Global Fund Solutions

About KFintech

KFintech Story

ESG

CSR

News

Client Speak

WebileApps

Hexagram

Functions of PFRDA (Pension Fund Regulatory & Development Authority)

Benefits of Joining Corporate National Pension System (NPS) – KFintech

Are NPS Returns and Maturity Amount Taxable?

How Does NPS Work for Government Employees?

Benefits & Features of Investing in NPS

Should You Invest in the NPS?

What is the National Pension Scheme (NPS)? Does it Help in Saving Tax?

How many mutual funds make a good Portfolio

Learn How to Open a National Pension System (NPS) Account – Online or Offline?

NPS Investment – A Step Towards Retirement Planning