NPS KFintech - Central Government Pension Scheme

The Central Government had introduced the National Pension System (NPS) with effect from January 1, 2004 (except for armed forces) replacing the existing system of Defined Benefit Pension System vide Government of India, Ministry of Finance, Department of Economic Affairs Notification, dated 22nd December 2003. The NPS came into operation with effect from 1st January 2004 and is applicable to all new employees of ‘Central Government service’ (except Armed Forces) and ‘Central Autonomous Bodies’, joining Government service on or after 1st January 2004.

Overview of the Central Government Pension Scheme

The National Pension System (NPS) is a government-sponsored retirement savings scheme in India. It was introduced in January 2004 by the then Prime Minister of India, Atal Bihari Vajpayee. The NPS is a defined contribution scheme with a minimum monthly contribution of Rs. 100 and a maximum of Rs. 1,50,000. Under NPS, there are two types of accounts: Tier I and Tier II. The Tier I account is mandatory for all subscribers, while the Tier II account is voluntary. NPS KFintech allows all citizens of India, regardless of their occupation, to save for their retirement.

NPS Central Government Eligibility & Registration Process

The NPS is open to all Indian citizens between the ages of 18 and 65. To join the NPS, you must first open an account with a Point-of-Presence (PoP) provider. Once you have opened an account, you will be allotted a Permanent Retirement Account Number (PRAN). You can then start making contributions to your NPS account.

The NPS is a long-term investment scheme, and you can invest till the age of 65. At the time of retirement, you can choose to withdraw up to 60% of your corpus in a lump sum. The remaining 40% must be used to purchase an annuity plan that will provide you with a regular income in your retirement years.

FAQs

Who administers the NPS Pension Scheme by the central government?

The NPS is administered by the Pension Fund Regulatory and Development Authority (PFRDA). The PFRDA has appointed Nodal Officers in various central government ministries/departments to facilitate the smooth implementation of NPS.

Who are the pension fund managers (PFMs) for NPS?

There are eight PFMs appointed by PFRDA to manage NPS funds: SBI Pension Funds Pvt. Ltd., LIC Pension Fund Ltd., UTI Retirement Solutions Ltd., ICICI Prudential Pension Funds Management Co. Ltd., Kotak Mahindra Asset Management Co. Ltd., HDFC Asset Management Co. Ltd., Reliance Capital Asset Management Co. Ltd. and NSDL Pension Fund Agency Pvt. Ltd.

Is there any tax benefit to NPS?

Yes, NPS offers tax benefits under Section 80CCD(I) and (II) of the Income Tax Act. Under Section 80CCD(I), the maximum amount that can be deducted from your taxable income is Rs. 1,50,000. This includes the employer's contribution of up to Rs. 50,000. Under Section 80CCD(II), you can make an additional contribution of up to Rs. 50,000 to NPS, over and above the limit of Rs. 150,000 under Section 80CCD(I). This deduction is available only to self-employed individuals and not to salaried employees.

Who is covered under the NPS Central Government scheme?

All regular central government employees who joined service on or after 01.01.2004 are covered under the NPS Central Government scheme. All state government employees, autonomous body employees, and local body employees can also join NPS through their respective employers.

Under the Central Government, three level hierarchy is followed:

Principal Account Office (PrAO):

It plays a supervisory role and its main function is to monitor the performances of the Nodal Offices under its jurisdiction.

Pay and Account Office (PAO):

It provides the subscriber’s details to CRA and remits the funds to Trustee Bank which in turn transfers the funds to Pension Fund Mangers (PFMs) for investment. Units are allotted to the subscriber’s PRAN based on their contribution amount.

Drawing and Disbursement Officer (DDO): They act as an interface between the PAO and the subscriber. DDO deducts the contribution from employee’s salaries and provides information to PAO about subscriber pension contribution.

The Central Government had introduced the National Pension System (NPS) with effect from January 1, 2004 (except for armed forces). Hence, all Central Government employees joining on or after 01-01-2004 are mandatorily covered under NPS.