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CPDocs NPS Introduction
CPDocs NPS Introduction
About NPS
USP of NPS
About NPS
Development Authority
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How NPS Works?
Employee starts investing in NPS directly / through On Exit, a portion of Corpus comes to Employee in lump sum and
Employer balance to be invested in Annuity
Accumulation Phase
Withdrawal Phase
In case of death of
Employee, Nominee / Legal Heir can
claim the Corpus
Employee starts getting pension depending on the Annuity
scheme selection
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Value proposition for Employees
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Exclusive Tax Benefits beyond 80C
Particulars Without NPS With NPS
1. Contribution of up to 10% of Basic Salary (to the Other Allowances 16,63,800 14,63,800
extent of 7.5 lakh*) is eligible for tax deduction u/s Corporate Contribution - EPF 2,40,000 2,40,000
80CCD (2) Corporate Contribution - Gratuity 96,200 96,200
Corporate Contribution - NPS 0 2,00,000
2. Contribution of up to Rs.50,000 is eligible for tax Total Salary 50,00,000 50,00,000
deduction u/s 80CCD (1B)
Deductions
80CCE 1,50,000 1,50,000
Corporate Contribution – EPF 2,40,000 2,40,000
Both the tax benefits are mutually exclusive and can be Corporate Contribution – Gratuity 96,200 96,200
availed of at the same time Corporate Contribution - NPS [80CCD (2)] 0 2,00,000
Individual Contribution to NPS [80CCD (1B)] 0 50,000
* This limit includes Employer’s EFF and Superannuation Total Deductions 4,86,200 7,36,200
contribution
Taxable Salary 45,13,800 42,63,800
Change in Taxable Salary 2,50,000
Tax Saved on NPS investment @ 30% 75,000
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Extremely Low Cost of Operations
ULIP 2.50%
ULPP 2.00%
MF - Equity 2.25%
MF - Debt 0.75%
NPS 0.15%
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NPS Scheme details
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Types of NPS Accounts & Operating Guidelines
Its mandatory to open in order to join NPS Option for Subscriber. It can be opened later as well
Withdrawal from this account is conditional Withdrawal from this account is permitted any time
NPS account is frozen if employee does not deposit minimum annual contribution required.
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Choice of Fund Managers, Funds & Investment Strategies
Choice of Pension Fund Manager - Employee gets a Choice of Asset Class (Fund)
choice to select any of the registered Pension Fund
Managers to manage the funds Equities (E)
Employee can change the Pension Fund Manager once in a financial year and investment strategy twice in a financial year.
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Active Choice – Equity Exposure Limit
Employee up to 50 years of age can opt for up to 75% of equity exposure. Post that, the equity exposure would keep on
reducing as per below chart:
51 72.50%
52 70.00%
53 67.50%
54 65.00%
55 62.50%
56 60.00%
57 57.50%
58 55.00%
59 52.50%
60 50.00%
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Auto Choice – Investment Pattern
Aggressive Life Cycle (LC75) Moderate Life Cycle (LC50) Conservative Life Cycle (LC25)
Age (Yrs) E% C% G% E% C% G% E% C% G%
< = 35 75 10 15 50 30 20 25 45 30
36 71 11 18 48 29 23 24 43 33
37 67 12 21 46 28 26 23 41 36
38 63 13 24 44 27 29 22 39 39
39 59 14 27 42 26 32 21 37 42
40 55 15 30 40 25 35 20 35 45
41 51 16 33 38 24 38 19 33 48
42 47 17 36 36 23 41 18 31 51
43 43 18 39 34 22 44 17 29 54
44 39 19 42 32 21 47 16 27 57
45 35 20 45 30 20 50 15 25 60
46 32 20 48 28 19 53 14 23 63
47 29 20 51 26 18 56 13 21 66
48 26 20 54 24 17 59 12 19 69
49 23 20 57 22 16 62 11 17 72
50 20 20 60 20 15 65 10 15 75
51 19 18 63 18 14 68 9 13 78
52 18 16 66 16 13 71 8 11 81
53 17 14 69 14 12 74 7 9 84
54 16 12 72 12 11 77 6 7 87
> = 55 15 10 75 10 10 80 5 5 90
Re-balancing of portfolio under Auto choice is done on next date of birth of the employee. It’s a system driven activity
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Fund Performance
Fund Performance of NPS PFMs as on: 2nd July, 2021
Moderate / Balanced Investment (50% Equities, 30% Corporate Bonds, 20% G-Sec)
PFM 1 Yr Rank 3 Yrs Rank 5 Yrs Rank 7 Yrs Rank
HDFC Pension 28.78% 4 13.15% 1 12.19% 1 11.20% 1
ICICI Pru Pension 29.45% 1 12.58% 2 11.43% 2 10.74% 2
Kotak Pension 27.50% 5 12.30% 4 11.28% 3 10.60% 4
SBI Pension 26.79% 6 12.07% 7 11.24% 4 10.57% 5
UTI pension 28.82% 3 12.11% 6 11.13% 5 10.70% 3
LIC Pension 29.42% 2 12.50% 3 11.04% 6 10.38% 6
• Allowed after 3 years of • Allowed after 10 years of • Exit on retirement age • Entire Corpus can be
account opening account opening defined by the Corporate claimed by nominee / legal
is treated as exit on heir
• Up to 25% of Contributed • Up to 20% of Corpus is maturity
amount can be withdrawn allowed for withdrawal
• Up to 60% of Corpus is
• In the entire life span, 3 • Balance amount gets allowed for withdrawal
withdrawals are permitted invested in annuity
• Minimum 40% of Corpus to
• Contribution deposited for be invested in annuity
availing tax benefit u/s
80CCD (2) shall not be
available for partial
withdrawal
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Tax Treatment on Partial Withdrawal, Exit & Death Benefit
Amount withdrawn is tax Amount withdrawn is tax Amount withdrawn is tax Amount received by
free free free Nominee / Legal heir is tax
exempt
Pension received is treated as Income and will be taxed appropriately, if falling into any tax bracket
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Investment in Annuity
Choice of Annuity Service Provider Choice of Annuity Scheme
1. HDFC Standard Life Insurance 1. Pension payable for life at a uniform rate to the
Subscriber only
2. ICICI Prudential Life Insurance
2. Pension payable for 5, 10, 15 or 20 years certain
3. Bajaj Allianz Life Insurance and thereafter as long as Subscriber is alive
4. Star Union Dai – Ichi Life Insurance 3. Pension for life with return of purchase price on
death of the Subscriber
5. Kotak Mahindra Life Insurance
4. Pension for life with a provision of 50% / 100%
6. Canara HSBC Oriental Bank of Commerce Life
of the annuity payable to spouse during his/her
Insurance
lifetime on death of the Subscriber
7. India First Life Insurance
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Charges Under NPS (exclusive of GST)
Pension Fund Manager Fees: From 1st Apr’21, Fund Management charge shall be levied basis below AUM slab of the Fund Manager.
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Thanks