Sunday, August 17, 2014

NEW PENSION SCHEME - SOME IMPORTANT FAQs


The Central Government has introduced the Defined Contribution based Pension System known as the National Pension System (NPS) replacing the existing system of Defined Benefit Pension with effect from January 01, 2004.
NPS is applicable to all new employees of Central Government service, except Armed Forces, who have joined Government service on or after 1st January 2004.The person (employee/citizen) who joins the NPS will be known as Subscriber in the NPS. Under the NPS, each Subscriber will open an account with Central Recordkeeping Agency (CRA) which will be identified through unique Permanent Retirement Account Number (PRAN).Under NPS, two types of account would be available to subscribers i.e., Tier I & Tier II; Tier I account - where a subscriber contributes his / her savings for retirement in to a non-withdrawable account, and a Tier II account - a voluntary savings account from which subscribers are free to withdraw his / her savings whenever he/she wishes. The facility of Tier II account was made available from December 1, 2009 to all citizens of India including Govt. employees mandatorily covered under NPS. An active Tier I account will be a pre requisite for opening of a Tier II.
1: 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. 
2: It is portable - Each employee is identified by a unique number and has a separate Permanent Retirement Account which is portable i.e., will remain same even if an employee gets transferred to any other office.
3: It is simple - All the subscriber has to do, is to open an account with his/her nodal office and get a PRAN.
4. It is regulated - NPS is regulated by PFRDA, with transparent investment norms & regular monitoring and performance review of fund managers by NPS Trust.
Swavalamban Yojana is a scheme announced by the Government of India under which for each NPS account opened in the year 2009-10 and 2010-11, Government will contribute Rs. 1000 per year for the next three years, subject to certain conditions such as eligibility criteria etc as laid down by Government of India.
For the purpose of this scheme, a person will be deemed to belong to the unorganised sector, if that person : is not in regular employment of the Central or a state government, or an autonomous body/ public sector undertaking of the Central or state government having employer assisted retirement benefit scheme, or is not covered by a social security scheme under any of the following laws
·                   Employees Provident Fund and miscellaneous Provisions Act,1952
·                   The Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948
·                   The Seamens Provident Fund Act, 1966
·                  The Assam Tea Plantations Provident Fund and Pension Fund Scheme Act, 1955
·                  The Jammu and Kashmir Employees Provident Fund Act, 1961
The scheme will be applicable to all persons in the unorganised sector subject to the condition that the benefit of Central Government contribution will be available only to those persons whose minimum contribution in Tier I account is Rs.1,000 per annum and maximum of Rs. 12,000 per annum, for both Tier I and II taken together. The central government employee will not be eligible for swavalamban yojana.
For Employees :
Employee as well as employers contribution to the account of employee is eligible for tax exemption as per the Income Tax Act, 1961 as amended from time to time. As per finance bill 2011-12, the employee contribution to NPS upto 10% of basic plus DA is allowable deduction under section 80 CCD(1) within overall limit of Rs. 1 lakh. The employers contribution to NPS upto 10% of basic plus DA is allowed deduction under section 80CCD (2) and excluded from the limit of Rs.1 lakh. (http://indiabudget.nic.in).
For Employers :
Can claim tax benefits for the amount contributed towards pension of employees. From 1st Apr, 2012 up to 10% of the salary (basic and dearness allowance) of employers Contribution can be deducted as Business Expense from their Profit & Loss Account.
A print out of the Statement of Transaction (SOT) could be used as a document for claiming Tax benefit.
No. At present, a subscriber cannot avail a loan against his / her NPS holdings.

LINK TO KNOW UR NPS ACCOUNT DETAILS USE USER ID AND PASSWORD PROVIDED BY NPS FOR LOGIN. 


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