In 2004, the National Pension Scheme (NPS) was introduced for salaried individuals as an alternative to the Employee Provident Fund (EPF). The scheme was later extended to all individuals meeting the NPS eligibility criteria. The scheme aims to provide all Indian citizens with a regular income during their old-age and enhance social security in the country.
What is the NPS?
The National Pension Scheme (NPS), earlier called the New Pension Scheme, is a pension cum investment scheme. It is offered by the Government of India to guarantee old age security to Indian citizens. NPS invests the subscribers’ contributions into several market-linked instruments like debt and equity. The pension amount received after retirement depends on the performance of these investments.
NPS Eligibility Norms
- The scheme is offered to private sector employees, government employees, and self-employed professionals.
- The NPS age eligibility is between 18 years and 60 years, at the time of application submission.
- The subscriber must submit valid KYC documents, such as Aadhaar Card, PAN Card, Voter ID, bank statement, etc.
- Both resident and non-resident Indians meeting the age criteria can open an NPS account. The NPS account of a non-resident Indian (NRI) is regulated by the Reserve Bank of India (RBI) and the Foreign Exchange Management Act, 1999 (FEMA).
Documents Required to Open an NPS Account
Once you fulfil the National Pension Scheme eligibility, you need to submit the following documents to open and maintain an NPS account:
- Subscriber registration form
- A passport-sized photograph
- Proof of address (Driving license, Passport, Aadhaar Card)
- Proof of identity
- Proof of age or date of birth
- A cancelled cheque, if required
Types of NPS Accounts
There are two types of NPS accounts available to a subscriber. A Tier-1 account is mandatory, while Tier-2 accounts are voluntary.
- Tier-1 account: Subscribers use this account to contribute towards their pension from their savings. Withdrawals are restricted until retirement. The subscriber can claim tax benefits against the contributions made as per existing income tax policies.
- Tier-2 account: This account is optional and for investment purposes only. The applicant can withdraw from this account when required. Investments in NPS tier-2 accounts are not eligible for tax benefits.
Check your eligibility for NPS
- Can I open multiple NPS accounts?
An individual cannot open more than one NPS account. However, the applicant can open one account in NPS and another in the Atal Pension Yojna.
- Can I open a joint NPS account?
As per the National Pension Scheme eligibility criteria, the subscriber must apply in an individual capacity. One cannot open or operate the account jointly with a spouse, child, relative, or on behalf of HUF.
- Can I open an NPS account if I have a PPF or any other pension plan?
Yes, even if you contribute towards the EPF or you have an investment in the PPF, you fulfil the eligibility for opening an NPS account.
The National Pension Scheme brings an attractive long-term saving avenue, helping individuals plan their retirement effectively.Additionally, like other pension plans, the National Pension Scheme too makes use of compounding interest for calculating the returns.