What is NPS
The National Pension System (NPS) is a voluntary, defined contribution retirement savings scheme that enables subscribers to make the best decisions for their future by making systematic savings throughout their working lives. NPS aims to instil in citizens the habit of saving for retirement. It is an attempt to find a long-term solution to the problem of providing adequate retirement income to every Indian citizen.
When registering in the CRA system under NPS, an NPS Subscriber must select the Pension Fund Manager (PFM) as well as the scheme preference. The Subscriber has several options from which to choose.
There are multiple PFMs in NPS, as well as investment options (automatic or active) and four asset classes, namely equity, corporate debt, government bonds, and alternative investment funds. The Subscriber first selects the PFM, and after that, the Subscriber has the option of selecting any of the Investment Options.
Investment Options
The Subscriber must choose between Active Choice and Auto Choice for his or her investment.
- Active Choice : Individual funds
In this type of investment option, the Subscriber has the right to actively choose how his or her contribution is invested, based on personal preference. The Subscriber must provide the PFM, Asset Class, and percentage allocation for each scheme of the PFM.
There are 4 Asset Classes Equity and Asset Classes - Asset Class E Corporate Debt - Asset Class C Government Bonds - Asset Class G Alternative Investment Funds - Asset Class A
There are certain age restrictions subject to asset allocation-
* From the age of 51 and up, the maximum permitted equity investment will be following the equity allocation matrix .The tapering off of equity allocation will be carried out in accordance with the matrix based on the Subscriber's date of birth.
* For Alternative Investment Funds, the percentage contribution value cannot exceed 5%.
* The total allocation across the asset classes E, C, G, and A must be 100%
- Auto choice : Lifecycle Fund
NPS subscribers who are unable to choose their own asset allocation can select the Auto choice option (life stage investing option). This option allocates funds based on the age of the subscriber. There are three risk-based investment options under the Auto choice option: LC 25, LC 50, and LC 75.
A. LC 25 - Conservative Life Cycle Fund
The LC25 imposes a 25% cap on total asset allocation in asset class E. As the subscriber ages, his or her exposure to equity investments decreases gradually.
B. LC 50 - Moderate Life Cycle Fund
The LC50 imposes a 50% cap on total asset allocation in asset class E. As the subscriber ages, his or her exposure to equity investment decreases gradually.
C. LC 75 - Aggressive Life Cycle Fund
The LC75 imposes a 75% cap on total asset allocation in asset class E. As the subscriber ages, his or her exposure to equity investment decreases gradually.
How can PensionBox help?
PensionBox allows people to better plan their retirement, keep track of all of their private pensions, including EPF, PPF, and NPS, under one roof.
PensionBox simplifies the National Pension System(NPS), the government's pension scheme for private employees both for retail users and HRs/companies.
If you don’t have an NPS account, you can simply open your pension account within 2 minutes and if you have NPS PRAN already, you will be able track, invest and manage everything free of charge with best user experience.
We never touch or hold your money directly, your investments go safely to your chosen pension fund through approved channels.
We are built with Zerodha as POP , ensuring transparency, data security, and peace of mind. Your retirement savings are protected by regulation and secured by technology.
That’s why, PensionBox brings transparency, zero charges, timely support and freedom to select any pension fund so that you get the best experience investing in NPS & be better future ready.
That’s not it, we help you & your company together to maximise contribution and tax savings with minimal charges & best user experience.
If you are an existing zerodha user then you get a fast login or sign up using kite ID.
Once you are onboarded with kite ID, you get free access to
- Open NPS in 2 minutes
- Track existing NPS
- POP shift or CRA shifting
- Invest in one time or create SIP in NPS
- Withdraw NPS requests & instant withdraw tier 2
- Create your dream retirement plan
- Open NPS Vatsalya for your kid
- Share with HR (To unlock more tax benefits)
- Employer Contribution:
- Contributions made by your employer to your NPS account are tax-free up to 14% of your basic salary under Section 80CCD(2). Do connect us with your HR to enable this for you.
Tax Benefits in Old Tax Regime - Self-Contribution:
- Deduction up to ₹1.5 lakh under Section 80C.
- Additional deduction of ₹50,000 under Section 80CCD(1B) — exclusive to NPS investments!
- This allows you to claim a total deduction of up to ₹2 lakh every year on your NPS contributions.
- Employer Contribution:
- Contributions made by your employer to your NPS account are tax-free up to 10% of your basic salary (Basic + DA) under Section 80CCD(2). Do connect us with your HR to enable this for you.
- This is over and above your personal deduction limits, giving you extra tax efficiency.
Feel free to book a free call to learn more about NPS, NPS Vatsalya, Corporate NPS & PensionBox or contact the support team.
