What is a National Pension System?

• The National Pension System (NPS) is a Voluntary Defined Contribution Pension system administered and regulated by the Pension Fund Regulatory and Development Authority (PFRDA), created by an Act of the Parliament of India.

• The NPS started with the decision of the Government of India to stop defined benefit pensions for all its employees who joined after 1 January 2004. While the scheme was initially designed for government employees only, it was opened up for all citizens of India between the age of 18 and 65 in 2009.

• The NPS, like PPF & EPF is an EEE (Exempt-Exempt-Exempt) instrument in India where the entire corpus escapes tax at maturity & entire pension withdrawal amount is tax-free.

• NPS is an attempt by the government to create a pensioned society in India. In its overall structure NPS is closer to 401(k) plans of the United States.

• Today, the NPS is readily available and tax efficient under Section 80CCC and Section 80CCD.

• The scheme encourages people to invest in a pension account at regular intervals during the course of their employment. After retirement, the subscribers can take out a certain percentage of the corpus. As an NPS account holder, you will receive the remaining amount as a monthly pension post your retirement.

• NPS scheme holds immense value for anyone who works in the private sector and requires a regular pension after retirement.