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National Pension System (NPS)

Government of India introduced National Pension System [NPS] with an intention to provide social security to the common public. The unorganized sector can get the benefit of regular income after the earning age in the form of pension. During the earning age, one can contribute towards the NPS, and on attaining the superannuation age i.e. 60 years, he / she can get the pension from the corpus that is contributed till then.

Karnataka Bank has tied up with Pension Fund Regulatory and Development Authority (PFRDA) for providing NPS services to our customers in association with NSDL e-Governance Infrastructure P. ltd. which is the approved Central Record Keeping Agency (CRA) by PFRDA for the NPS scheme.

By investing in to the scheme, customer will get not only pension but also get additional income tax relief under Section 80 CCD(1)(b) for investment made up to Rs. 50,000/- over and above the tax relief available under Section 80 (C) of the Income tax Act.

A Subscriber to NPS will have two-tiered account; namely Tier I and Tier II. While every registration to the scheme is under the Tier I account; the Tier II account is optional to the Subscriber flexible withdrawal options.

Features of NPS Scheme:-

Particulars Tier I Tier II
Option of selection of the Account Mandatory Optional
Withdrawal Facility Available Conditional & Restricted Withdrawal Yes
Minimum Contribution at the time of A/c opening 500 1000
Minimum amount of subsequent contribution 500 250
Minimum Contribution Required per year 1000 Nil
Minimum no. of contribution per year One Nil
Frequency of contribution permitted Unlimited Unlimited
Tax Benefits for Un-Organised* Customers (General Public) * Tax benefit to the maximum limit of ` 50,000/- per year is presently available under Section 80 CCD1 (b) of Income Tax Act. This is an independent rebate and not related to the exemptions available under Section 80 C of the IT Act. Not Available
Tax Benefits for Corporates and Corporate employees*

* For Employer: Contributions made by the employer (up to 10% of Basic + DA) is allowed as a business expense under Section 36 (1) iv (a) of Income Tax Act 1961.

*For Employee: Employees own contribution is eligible for tax deduction presently, under sec 80 CCD (1) of Income Tax Act up to 10% of salary (Basic + DA). This is within the overall ceiling of ` 1.50 Lakhs under Sec. 80 CCE of the Income Tax Act.

* Employee also gets tax deduction for the contribution made by the employer under section 80 CCD (2) of IT act up to 10% of salary (Basic + DA) which is in addition to the tax benefits available under Sec. 80 CCE. No Monetary ceiling.

* Subscriber is allowed tax deduction in addition to the deduction allowed under Sec. 80CCD(1) for additional contribution in his NPS account subject to maximum investment of ` 50,000/- under sec. 80CCD 1(B).

*For Self- Employed: 20% of the Gross Income is eligible for tax deduction under sec 80 CCD (1) of Income Tax Act.

 

In each account customer have the option to choose Pension Fund Manager and Investment choice separately. Currently, there are 8 Fund Managers handling NPS with different fund options as under:

SBI Pension Funds Ltd LIC Funds Ltd
UTI Retirement Solutions Ltd ICICI Prudential Pension funds Management Company Ltd
Reliance Capital Pension Fund Ltd HDFC Pension Fund Ltd
Kotak Mahindra Pension Fund Ltd Birla Sun Life Pension Management Ltd

Selection of Pension Fund is mandatory both in Active and Auto Choice. If the customer decides not to select any Fund Manager at the time of registration, then the Fund Manager by default will be SBI Pension Funds Private Limited, as per the direction from PFRDA.

The contributions made by the customers will be invested in various funds by the Fund Managers. Normally the customer can contribute to Tier I account from his/her attaining 18 years of age till the completion of the 60th year ,and, with special request, he/she can continue to contribute up to maximum age of 70 years. On attaining the age of 60 years [Superannuation], the Subscriber can opt for Commutation up to a maximum of 60% of the Outstanding Fund Value [Corpus]. However, only 40% of the commutation is Tax Free ,the remaining 20 % of the Commuted Amount is taxable as per the extant tax guidelines and remaining 40% of such Outstanding Fund Value [Corpus] is mandatorily to be utilised as Annuity (pension), in the current tax structure . In simple terms, 40% can be commuted and remaining 60% will be used as Annuity. In case if the Subscriber so desires, he/she can, defer the receipt of pension for a further period of 3 years from his Superannuation ,i.e. up his 63rd year. Customer can approach any our branch for availing the scheme.