The Pension Fund Regulatory & Development Authority (PFRDA) had recently revised the existing age of entry, which is 18-65 years, to 18-70 years for senior citizens who want to stay invested in NPS over and above 60 years or above their superannuation, or senior citizens subscribers above 65 years who want to open a National Pension System (NPS) account to create a long-term pension corpus.
Owing to the new age rules issued by the regulatory any Indian citizen, resident or non-resident, and Overseas Citizen of India (OCI) between the age group of 65 and 70 can subscribe for NPS and maintain or extend their NPS account until they reach the age of 75, subscribers who have previously deactivated their NPS accounts are now eligible to set up a new NPS account even the subscribers can also open an NPS Tier II Account and withdraw corpus from their NPS Tier I account at any time. Now let's look at the peculiar features and benefits of the new age rule under NPS for elderly folk, as well as the process for opening an NPS account online.
Choice of Pension Fund (PF) and Asset Allocation
When a subscriber joins NPS beyond the age of 65, he or she has the option of choosing between pension fund (PF) and Asset Allocation, with a maximum equity allocation of 15% and 50% under Auto and Active Choice, respectively. The pension fund can be modified only once a year, while the asset allocation can be adjusted two times a year. Below are the two investment options under NPS for subscribers over 65 years of age.
The maximum allocation to the equity asset class in (%) under this investment option is as follows:
|Asset Class in per cent||Asset Class in per cent||Asset Class in per cent|
|Sl. No.||Auto Choice||Equity (E)||Corporate Bonds (C)||Government Securities (G)|
|1||Aggressive Life Cycle Fund (LC 75)||15||10||75|
|2||Moderate Life Cycle Fund (LC 50)||10||10||80|
|3||Conservative Life Cycle Fund (LC 25)||5||5||90|
The limit on equity allocation is 50%, while the remainder of the asset classes is as follows:
|Cap on Asset Class||Cap on Asset Class||Cap on Asset Class||Cap on Asset Class|
|Active Choice||Equity (E)||Corporate Bonds (C)||Government Securities (G)||Alternate Investment (A)|
|Percentage of Allocation||50%||100%||100%||5%|
|(Alternate Investment as asset class not provided under Tier II), Source: http://www.npstrust.org.in/|
Exit and withdrawal rules
Subscribers who join NPS after the age of 65 will be subject to the following exit rules:
Normal Exit shall be after 3 years: The subscriber must use at least 40% of the corpus to buy an annuity, with the remainder available for withdrawal as a lump sum settlement or withdrawal. If the corpus is equal to or less than Rs 5.00 lakh, the subscriber can then choose to withdraw the whole accrued pension fund in a lump sum.
Premature exit: Premature exit is defined as existing before the conclusion of three years. The subscriber is obligated to use at least 80% of the corpus for annuity purchase and the remainder can be withdrawn in a lump sum according to the premature rules under NPS. If the corpus is equal to or less than Rs 2.5 lakh, the subscriber can then choose to withdraw the whole accrued pension fund in one single amount or lump sum.
In case of death: In the event of the subscriber's unfortunate death, the whole corpus will be reimbursed in one single payment or lump sum to the enrolled nominee.
|Type of Exit||Lump sum withdrawal (Maximum)||Annuity (Minimum)|
|Normal Exit (if Corpus > Rs 5 Lakh)||60%||40%|
|Pre-Mature Exit (if Corpus > Rs 2.5 Lakh)||20%||80%|
|Unfortunate Death of the Subscriber||Entire corpus payable to the nominee as lump sum|
Tax benefits under NPS
Under NPS a subscriber can receive a tax advantage under Section 80 CCD (1) up to a maximum of Rs. 1.5 lac under Section 80 CCE. NPS subscribers are eligible for an additional deduction of up to Rs. 50,000 for contributions in NPS (Tier I account) under section 80CCD (1B). This would be an additional tax benefit to the Rs. 1.5 lakh deduction provided under Section 80C of the Income Tax Act of 1961.
Except for the tax breaks provided under Section 80CCD, subscribers can withdraw funds from their NPS tier I account in part before reaching the age of 60 for specific cases where the amount is withdrawn up to 25% of the subscriber's contribution is tax-free. The amount contributed for the purchase of an annuity, on the other hand, is completely tax-free.
The annuity benefit you get in subsequent years will be taxable. Only after the subscriber reaches the age of 60, up to 40% of the overall corpus withdrawn in lump-sum is tax-free under NPS Tier I account. Contributing in a Tier II NPS Account, however, does not offer any tax deduction.
How to open an NPS account?
By following the ways and steps mentioned below one can open an NPS account effectively.
By visiting POP-SP
Any Indian citizen between the ages of 18 and 70 can open an NPS account at any POP-SP. An individual can get a PRAN application form from any of the Point of Presence - Service Providers (POP-SP) filing which he or she can submit the form for account opening. He or she then must make sure that the form is duly filed without any error including passport size photograph, signature, PAN number, and other details such as KYC documentation such as proof of identity and proof of address.
To submit the duly filed PRAN application along with the KYC documents the individual needs to visit his or her local or nearest POP-SP. The CRA will deliver your PRAN card to your correspondence address. POP-SP will issue you a receipt number after you submit your PRAN application. The individual can verify the status of his or her PRAN application by visiting https://cra-nsdl.com/CRA/pranCardStatusInput.do. While submitting the request for registration with any POP-SP, the individual must make the initial contribution of Rs 500.
Individuals can use PAN & Bank credentials to open an NPS account online by visiting eNPS. Bank/Demat/Folio Account details for KYC validation for subscriber registration by ENPS with the approved bank or non-bank. Based on your selection made throughout the registration procedure, the KYC of the individual will be verified by the Bank/Non-Bank POP. For more information, subscribers can click here.