Central Recordkeeping Agency (CRA)

Central Recordkeeping Agency (CRA)

• Employer contributing to the NPS on behalf of an employee will get deduction from his income (i.e. employer's income) an amount equivalent to the amount contributed or 10% of BASIC SALARY + DA of the employee, whichever is less. (Section 36 (1) (iv a) of the Income Tax Act 1961)
• Employer's contribution to NPS on behalf of the employee is treated as perquisite in the hands of the employees, but is deductible u/s80CCD(2) of the Income tax Act,1961 to the extent of 10% of basic salary. This deduction is over and above the limit of Rs.1 lac u/s 80C of the Income tax Act,1961. This will lessen the tax burden of the employee to the extent of amount deductible u/s80CCD(2) of the Income tax Act,1961
  

Additional contribution by individual employee is eligible for deduction from Income under Section 80CCD of the Income Tax Act 1961. However, investments under Section 80C plus the premium on pension products on Section 80CCC should not exceed Rs.1 lakh per assessment year to claim for the deduction.

Tax Implication of NPS

NPS for Retirement Planning

NPS for Retirement Planning

• It is voluntary - NPS is open to every Indian citizen. Subscriber can choose the amount you want to set aside and save every year.
• It is flexible - Subscriber can choose your own investment option and Pension Fund Manager and see his money grow.
• It is portable - Subscriber can operate his account from anywhere in the country, even if he changes city, job or Pension Fund Manager.
• It is regulated - NPS is regulated by PFRDA, with transparent investment norms and regular monitoring and performance review of fund managers by NPS Trust.
• Reasonable market based returns - over the long term
• Tax Benefits - Contribution towards NPS exempted under Sec 80C
• Low cost investment - Cost effective mode of planning for one's retirement.

NPS Trust & Trustee Bank (TB)

NPS Trust & Trustee Bank (TB)

PFRDA has established the NPS Trust under Indian Trusts Act, 1882 and appointed NPS Board of Trustees under whom the administration of NPS vests under Indian Law. The Trust is responsible for taking care of funds under NPS. The Trust holds an account with Axis Bank and this bank is designated as Trustee Bank.

Trustee Bank manages the banking of pension funds in accordance with the applicable provisions of the NPS, the scheme, guidelines/notifications issued by PFRDA, Ministry of Finance and Government of India from time to time. Trustee Bank is Axis Bank.

Central Recordkeeping Agency (CRA)

• Recordkeeping, administration and customer service functions for all the subscribers of the NPS.
• Issue of unique Permanent Retirement Account Number (PRAN) to each subscriber, maintaining a database of all PRANs issued and recording transactions relating to each subscriber's PRAN.

• Acting as an operational interface between PFRDA and other NPS intermediaries such as Pension Fund Managers, Annuity Service Providers, Trustee Bank etc.
• Central Record Keeping Agency is National Securities Depository Limited (NSDL).

Pension Fund Regulatory and Development Authority (PFRDA)

Pension Fund Regulatory and Development Authority (PFRDA)

PFRDA is the regulator for the NPS. PFRDA is responsible for appointment of various intermediaries in the system such as Central Record Keeping Agency (CRA), Pension Fund Managers, Custodian, NPS Trustee Bank, etc.

NEW PENSION SCHEME NPS

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NEW PENSION SCHEME STRUCTURE

NNPS has unbundled Architecture, where each function is performed by different entities.

§  NPS is based on Personal retirement accounts (PRAs) created for individual members. NPS accumulates savings into subscriber's PRA while he is working and use the accumulations at retirement to procure a pension for the rest of his life.

§  PFRDA, a Prudent Regulator created by Government of India.

§  Central Record keeping lies with NSDL which is associated with various National level projects for recordkeeping functions.

§  Renowned Financial Institutions covering Public/Private Sector Banks, NBFC, Broking houses acting as POP.

§  Funds are managed by Fund Manager from Public & Private sector with proven track record.

§  Axis Bank, functions as Trustee Bank.

§  Stock Holding Corporation of India Ltd, functions as custodian for NPS.

§  NPS has an unbundled Architecture, where each function is performed by a different entity. NPS is a unique product which provides an opportunity for subscribers, to be serviced by the intermediaries which are renowned in their areas, that too at low cost, like:

o    At present, More than 50 POPs with over 14000 POP-SPs are registered for providing NPS services.

o    At present, 7 Annuity service providers have been selected to provide the Annuity.

o     Life insurance company is one of the approved Annuity Service Provider for NPS scheme.