NAP - National Pension Scheme
National Pension Scheme (NPS) is contribution (voluntary) retirement scheme introduced by the Government of India which allows subscribers to contribute some amount on a monthly basis as a systematic savings during his/her working career. It was introduced on January 1st, 2004 aiming at the newly employed individuals working with the government, excluding the likes of people related to the defense sector. However, it was made available for every citizen of India aged between 18 and 60 in 2009.
At the time of subscribing for NPS, each will be provided with Unique Permanent Retirement Account Number (PRAN) along with a set of two NPS accounts namely Tier I Account and Tier II Account.
- Tier I Account: This account is only for saving purpose for the subscriber to use it after retirement, no amount can be withdrawn from it.
- Tier II Account: This Account can be used by the subscriber for both savings and withdrawal purpose.
Tax deductions offered by NPS are:
| Deductible | Maximum limit | Section |
| Mandatory deduction from salary towards retirement | Rs.1.5 lakh | 80CCD (1) |
| Voluntary contribution towards NPS by employer | 10% of basic salary | 80CCD (2) |
| Voluntary contribution towards NPS made by employer | Rs.50,000 | 80CCD (1b) |
New Pension Scheme
It is the reframed version of the National Pension Scheme introduced by the Government of India which allows all the citizens of India (employees) whether working in public sector or in the private one to open an account for NPS.
There are three types of accounts New Pension Scheme provide with-
- Tier I Account: The subscriber is not allowed to withdraw any amount from this account until he/she retires. Also, all the public sector employees are required to contribute 10% of their income to this account.
- Tier II Account: Only a Tier I Account holder is allowed to open a Tier II Account. Also, it can be used by the subscriber for both savings and withdrawal.
- Swavalamban Account: This account is managed by the government itself. The government contributes an amount of Rs 1000 every year for a span of four years to encourage those people with poor economic conditions.
Eligibility Criteria
New Pension Scheme is applicable for all the Indian Citizens even if they are NRIs. However, there are some eligibility criteria for applying to this scheme.
- At the time of applying, an individual should be an adult (at least 18 years of age) but not more than 60 years.
- The applicant must comply with all the KYC (know your customer) terms and conditions.
Following people are not qualified for NPS
- People with mental illness.
- People already with an NPS account.
- A person who can't provide for their basic needs (a person who can't even pay his debt).