The National Pension Scheme (NPS) is a voluntary retirement scheme of the Central Government of India. This government-backed scheme is open to all citizens of India, irrespective of whether they are from the private sector, public sector, or the unorganized sector. However, the armed forces do not qualify for it. Unlike mutual funds online, the NPS is a market-linked plan where the risk involved is low.
Let’s find out more about the eligibility criteria, types of NPS accounts, and the calculator that can help you plan your investments in it.
What is the eligibility to apply for NPS?
Here are the eligibility criteria to apply for NPS:
- Only citizens of India and non-resident Indians (NRIs) can apply for the scheme.
- The minimum age to apply is 18 years, and the maximum age is 55 years.
- The minimum investment is Rs. 500 per month and Rs. 6,000 per annum.
- Only private, public, and unorganized sector employees can contribute to the scheme. The armed forces cannot participate in NPS.
What are the different types of NPS accounts?
There are two types of NPS accounts:
- Tier-I account: The Tier I account allows you to make a minimum contribution of Rs. 500 when opening the account. Moreover, if you opt for this account, you can withdraw only up to 60% of the total corpus at maturity. The remaining 40% has to be used to buy an annuity and is paid to you as a regular pension.
- Tier-II account: The Tier II account requires a minimum investment of Rs. 1000 when opening the account. Moreover, you can withdraw the entire account balance in a lump sum at maturity or make multiple withdrawals. In order to open the Tier II account, you first need a Tier I account.
Other than this, NPS also offers two choices – the auto and the active choice.
- Auto choice: Under this, a fund manager manages your investments on your behalf. This is similar to a SIP in mutual funds online, where the fund manager invests your money in different securities, such as equity, corporate and government bonds, etc. This can be suitable for investors with little to no understanding of investments.
- Active choice: There is no fund manager under this, and you manage your investments yourself. However, you can only have up to 75% in equities and 5% in alternative investment funds up to the age of 50 years. The remaining has to be in corporate bonds and government securities.
How to calculate your NPS returns?
You can use the online NPS calculator to calculate your returns. All you need to do is enter your details, like age, investment amount, etc., and the calculator will compute your estimated returns for you.
To sum it up
Now that you know about NPS and its features, you can consider investing in it for your future retirement security. To simplify all your investments and manage them in one place, you can also download the Tata Capital Moneyfy app.