NPS Calculator: The National Pension System (NPS) is one of the popular investment schemes that offer financial security and stability during old age as that is the time when retirees often lack a regular source of income. With life expectancy in India continuously increasing, it becomes more important for individuals to save for their golden years. NPS provides an opportunity for individuals to invest and accumulate savings, which, at the time of retirement, are disbursed as a lump sum and regular income through an annuity plan.
What is NPS and how it works?
The NPS was launched on January 1, 2004. Initially, NPS was implemented for new recruits in government service (excluding armed forces personnel). From May 1, 2009, it was extended on a voluntary basis to all citizens of the country, including workers in the unorganized sector.
Through the NPS, the government wants to meet the objective of providing retirement income to all citizens. The pension plan aims to introduce reforms and promote a culture of saving for retirement among citizens.
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NPS offers the following key features:
Permanent Retirement Account Number (PRAN): Each subscriber is provided a unique PRAN, which remains valid throughout their lifetime and can be accessed from any location in India.
Two Account Types:
Tier 1 Account: A mandatory retirement savings account with restricted withdrawal options.
Tier 2 Account: A voluntary savings account that allows subscribers to withdraw their savings freely. However, no tax benefits are provided on this account.
NPS withdrawal:
A subscriber is allowed complete 100% lump sum withdrawal if the corpus is less than Rs 5 lakh. If the corpus is more than Rs 5 lakh, at least 40% of the accumulated amount has to be utilised for purchase of an annuity providing for monthly pension to the subscriber and the balance 60% can be withdrawn as lump sum.
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