NPS Withdrawal Rules and Taxation Guidelines in 2020
Creating a sufficient retirement corpus by the end of his/her service period is one of the major financial goals of an individual. National Pension Scheme is one such good effort taken by the Central Government of India to provide a sustainable solution to provide retirement income to all citizens of India. What is National Pension Scheme all about? What are the NPS Withdrawal rules and guidelines now in 2019-2020?
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What is NPS?
National Pension Scheme, also known as New Pension Scheme (NPS) is a voluntary and defined contribution-based contribution system regulated by PFRDA (Pension Fund Regulatory and Development Authority). In this scheme, you can invest in a corpus which is later reinvested in the diversified portfolios consisting of government bonds, corporate debentures, and shares. The returns in NPS are market-linked and hence the contribution would grow and accumulate over a period of time. Committed pension fund managers are assigned the task of managing the invested funds. The pension scheme provides a fixed income for a number of years after retirement.
What are Tier I and Tier II accounts and how they can be opened?
NPS offers two types of accounts- Tier I and Tier II account.
Tier I is a permanent non-withdrawable account whereas Tier II is a voluntary withdrawable account. One can open Tier II account only if he has opened Tier I account. Any citizen of India aging between 18 to 60 years can become an NPS subscriber. To open an NPS account, one needs to get the application form of NPS that can be obtained from any point of Presence Service Providers (POP-SP) or it can be downloaded from the website https://www.npscra.nsdl.co.in/. Fill in all the details along with attaching your address proof, photograph, and ID proof. Submit the duly filled and signed documents to the POPSP office long with the first minimum contribution. Once the documents are verified and processed, a Permanent Retirement Account Number (PRAN) is created and sent to the subscriber’s address.
To start investing in NPS, it is mandatory to open Tier I account. The minimum contribution in Tier I is ₹. 500. For Tier II account, the minimum contribution for opening an account is ₹. 1000. Tier II account is like a saving account. One is free to withdraw the money as and when required.
NPS Withdrawal Rules and Guidelines in 2019-2020 for Tier-1 A/c
Certain rules and regulations need to be fulfilled for withdrawing funds from Tier I account. However, there are no rules of withdrawal in Tier II account.