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馃敶Is (NPS) National Pension System BEST retirement plan? Full details in Hindi - YouTube
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Welcome to yet another episode
of Labour Law Advisor
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My name is Mandeep and today
I will provide you information
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about NPS. Because this is a very
good retirement planning option.
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In this, you can earn more returns
than PPF and EPF.
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And this comes under Exempt, Exempt,
Exempt Category.
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That means a lot of your
tax is saved.
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And the most interesting thing
are you don't have to be
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an employee of an organization.
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You can start an NPS Account
from your end as well.
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I won't create the 1st video on NPS,
this will be 1st video on the NPS series.
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Because this is a very long topic.
and I will try whichever doubts
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that you have, that I could try
and solve it through such videos.
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Then don't forget to ask your
questions, after this video
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Because I will cover those questions
in the next video.
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And in the future, I will explain
you the comparison between
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NPS with PPF and EPF
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So that you can decide, which scheme
is better for you.
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So If you haven't subscribed to
our channel yet, then do it
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and simultaneously hit the bell
icon, because you will not want
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to miss such important videos.
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[Intro Music]
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In the year 2004, Central Government
had launched this scheme.
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Only for the Government Employees.
It has a similar protocol like
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PPF and EPF. You regularly contribute
an amount, that amount will be
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invested somewhere and after retirement
you can withdraw the amount.
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And you can even generate a Pension
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Then in the year 2009, PFRDA
i.e Pension Fund Regulatory and
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Development Authority got its charge
and they opened it for everyone.
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That means, even a normal person
can open his NPS account on
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voluntary basis. That means he
can open the account based on his
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choice. So If your age is
between 18-65, you wish to
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plan your retirement. You wish to
save your tax and you don't want
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to take a heavy
risk like the stock market.
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Then NPS is a very nice option
for you.
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How is NPS different from
PPF and EPF?
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I will prepare a separate video
of that and explain it to you.
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But as of now, you need to
understand that the interest
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you earn based on PPF and EPF
is decided in advance.
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And you are aware in regards to
the interest that you are supposed
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to earn. But in regards to NPS,
as the money is also invested in
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stock market and the returns of
the stock market is never fixed
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they can be either higher or
lower. Hence, your returns are
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also variable. But this doesn't
mean that there is a lot of
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risk there. It is very little
risk and I shall explain that
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to you in a while.
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And If I talk in regards to the
past 10 years, then NPS has given
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returns between 8-10%
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That means at times, they have
given more than PPF and EPF.
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While opening the Account,
you will require a minimum of INR 500/-
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And the minimum contribution at a
time is also INR 500/-
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Plus the minimum contribution that
you need to maintain in a year is also
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INR 500/- which needs to be done
mandatorily. That means every year
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you need to invest INR 500/-
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And If you didn't invest, until
2 years you didn't invest INR 500/- (twice)
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then your account will be considered dormant. But then you can
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re-activate by paying INR 1000/-
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The Government of India has appointed
7 Fund Managers, the one's who
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manage your funds invested in NPS.
which are LIC, HDFC Pension Fund,
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UTI Mutual Fund, SBI Pension Fund,
ICICI Prudential Fund, Aditya Birla
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Capital, Kotak Mahindra Bank
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As an NPS Subscriber, you can
choose among the 7, as to which
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Fund Manager will manage your money.
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And you can even change your
Fund Manager in the future.
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So you have that freedom.
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Now let's talk about where does
the money goes which is invested in NPS
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i.e. Where is it invested?
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Then it is divided into 4 categories.
1st is Low Risk, 2nd is Moderate Risk
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and 3rd is High Risk and 4th is
Very High Risk.
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Under Low-Risk Assets, there are
Government Bonds, Moderate Risk Asset includes
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Corporate Bonds, High-Risk includes
Equity i.e. Stock Market and
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Very High Risk includes Alternative
Investments, wherein you can only
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allocate 5% of your Total Fund.
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Because this is a very High
Risk Asset.
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Examples for Alternative Investments
are Real Estate Investment Trusts or
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Alternative Investment Funds or
IIT's i.e. Infrastructure Investment Funds
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Now let's talk about Asset Allocation,
as an NPS Subscriber, you have
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complete freedom to decide that how
much % of your funds should be
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invested in Equity, how much
% in Corporate Bonds,
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how much % in Government Bonds, and
how much will be invested in
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Alternative Funds
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There are 2 options for you,
either you choose Active Choice.
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In Active Choice, you can decide
on the percentage or else you
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can choose Auto Choice, wherein
you won't have to take so much trouble.
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First, I'll explain to you about Active
Choice. In Active Choice, although
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you have the freedom to decide your
%, but there is one limitation as well.
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Until 50 years of age, you can
allocate up to 75% of your funds
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in Equity, which means you can't
give 100% to your Equity.
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And once you turn 50, after that
every year, Equity Allocation
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keeps declining by 2.5% and it
will come to 50% once you reach 60.
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The funds are reduced from Equity
and is transferred to the Government
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Bonds or Corporate Bonds.
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This is done because Equity is
considered to be High-Risk and
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as you grow older, your capacity
to take risks decreases.
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It is done to save you from
risks.
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And the other % that will be
set by you, you can change that
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twice in a year.
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Now If we talk about Auto Choice.
This gives the exact same feeling
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as If a new person visits Subway
and prepares his own Sub
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Firstly, the poor chap has to
choose his bread and then he
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has to choose the stuffing inside.
Later, he needs to decide among
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varieties of sauce and this
sometimes becomes overwhelming.
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Then If you don't know how much
% should go in the Asset Class
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Then you select Auto Choice,
here you will find 3 simple options.
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1st is the Aggressive Life Cycle Fund,
which is made for High-Risk Takers
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Here, you have one condition, that
the Maximum Equity Allocation can
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be 75% only and you can do
it until 35 years.
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After that, every year your equity
allocation will decline by 4%
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and when you turn 55, then it
will remain 15% only.
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Or else, you can choose Moderate
Life Cycle Fund. Here there is
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Moderate Risk. Here you can't
allocate more than 50% until the
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age of 35, after that this
allocation will start declining
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by 2 - 2% every year and in the
end 10% of Equity Allocation will remain
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If you don't want to take
any risk, then you can opt for
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Conservative Life Cycle Fund.
Here, until the age of 35,
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you will have the option of
maintaining 25% of Equity Allocation
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After that, every year there will
be a decline of 1% and towards
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In the end, you will have 5% of
Equity Allocation.
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Now let's talk about the
different types of Withdrawals,
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Then the first thing that you should
know If this is a Retirement
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Planning Scheme. Then it's obvious
that it won't allow you to withdraw
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before your retirement period.
It won't do.
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Your lock-in period is
until 60 years of age.
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And after 60 years, you can
continue until 70 years of age.
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Or you can defer it until
70 years.
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To continue means, you are investing
a monthly contribution in that.
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And to defer means that you are
not providing contribution and
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you wish to withdraw after
70 years.
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Until 60 years of age, maximum
of 60% withdrawal is allowed.
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You can't withdraw more than that.
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And the remaining 40%, you need
to compulsorily buy an Annuity
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from an Insurance Provider
who will provide you a monthly
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pension on that amount.
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And the 60% which is the withdrawal,
If you wish to withdraw in 10
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different installments, then that
the facility is available as well.
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Let's assume, you had opened an
NPS Account in fun, you didn't
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invest more contribution or
you might have opened it late.
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Now the funds accumulated
is less than 2 Lakhs.
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Then you can withdraw 100%,
there is no issue with that.
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Now I have told you that
there is no withdrawal allowed.
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Until 60 years of age.
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But premature withdrawal is mostly
available in all the schemes,
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and NPS has it too.
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For Premature Withdrawal, you need
to regularly contribute for 3 years.
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After that, you can withdraw 25%
of your own contribution.
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Now, what do I mean by "Your own"?
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There are times wherein NPS
is allowed in the Company as well.
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i.e. You and your Employer both
contribute to your NPS.
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Then, in that case, you can't
withdraw the Employer Contribution
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You can withdraw 25% of your
own contribution.
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That too, up to 3 withdrawals,
Once in every 5 years.
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And that shouldn't be without
any reason.
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There have to be special reasons,
which are Serious Illnesses,
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Children's Wedding or Children's Education,
or to renovate or buy a house. If you
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wish to spend money on your
skill development. You can
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withdraw for that too and If
you wish to start a Business.
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Then you can withdraw money
for that too.
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Now, this was Premature Withdrawal,
there is another feature as
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Premature Exit. What does this
mean?
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This means that you have opened the NPS Account. But you wish to
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retire before 60 years of age
and wish to start the pension
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from NPS Account. Then that option
is available too.
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In that case, you need to keep
your account active for at least
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10 years. That means need to
consistently contribute until 10 years.
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And then you can withdraw maximum
20% and 80% you need to
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buy Annuity which will pay
monthly pension to you.
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And in this case, If your fund
is less than 1 Lakh, then you can
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withdraw 100% by taking voluntary
retirement.
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After Premature Withdrawal, even
after withdrawing your NPS Account
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is operational. But in the case
of Premature Exit, this doesn't happen.
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If you have taken a Premature Exit,
that is Voluntary Retirement, then
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your account will be closed and
you will start receiving pension
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exactly how it happens at 60.
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Before I mention the Tax
Benefit, I would like to give
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you an important announcement,
If in case you don't know
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then we have launched LLA
Professional Training Institute.
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Wherein we have for you a bunch
of Practical Courses, which will
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be extremely helpful in your
professional life and are very
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important to you.
[613]
For eg: the 1st Course that we
had launched was A to Z of Payroll
[618]
Processing, If you are from the
HR Field, then this course is
[621]
extremely useful to you.
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Because we have covered in depth
calculation in this.
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TDS, Bonus, Gratuity, EPF, ESI
everything is covered, that too practically.
[630]
That after opting for this course, no
matter how huge the company is
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you will be able to generate
their Payroll very easily.
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Similarly, we have recently launched
an Excel Course. which is useful in
[639]
every profession. If you think
that such Courses might add value to
[645]
your life, then the link is provided
in the description below.
[648]
We have kept the price extremely
affordable, so that more and more
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people can take advantage of it.
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If you are interested, then you can
check out the link in the description
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Now let's talk about its tax
benefits, then it comes under
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Exempt, Exempt, Exempt Category.
That means the contribution which
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is done in this is tax-free. The
return that is received on this
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is Tax-free and finally when you withdraw
the amount, then it is tax-free.
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But there is one component, which
is taxable. I'll explain that to you.
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Firstly, I will explain the tax
deductions to you.
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Section 80CCD: Under Sub Section 1,
you can claim a deduction of 1.5 Lakh
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which is a part of 80 C, which means
the contribution that is done on
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this can be claimed on 80 C
and you can't claim deductions
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which are above 1.5 Lakhs
in 80 C.
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You can claim an additional
deduction of INR 50,000/- more.
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Section 80CCD: Under Sub Section 1B
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That means you received 1.5 Lakh under
80C and INR 50,000/- was additional
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That means you can claim for
a deduction of 2 Lakhs
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Moreover, If your company provides
NPS, i.e. If you are on your behalf,
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your Employer also contributes
and you contribute yourself too.
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Then you can claim Employer Contribution
as well Under Section 80CCD: Sub Section 2
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which cannot be more than
10% of your Basic + DA
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And the contribution that the employer
provides, he shows it as a Business
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Expense, and claim it as a Tax
for his company.
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That also cannot be more than
10% of your Basic + DA
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You might have understood, that
how much ever you contribute
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in NPS in a year, you can claim
that on the deduction, there won't be
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any tax on that.
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The return that is earned on that
is also tax-free.
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And once you withdraw afterward,
that is also tax-free.
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But there is a catch, you are
withdrawing only 60%, 40% you will
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be purchasing Annuity on that, and you
will earn a monthly pension on that.
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Now the monthly pension can be
considered your part of income,
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and you will have to pay
tax on that.
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Apart from that, everything
is tax-free.
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And now you have got to know, that
NPS can also be applied to Companies.
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And Employer + Employee both
can contribute.
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But there is no compulsion, as in
the case of EPF of equal contribution.
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In NPS, there can be unequal contributions
too. There is a possibility that
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Yout Employer might contribute something
else and you are contributing
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something else or there is a
the possibility that your Employer
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might be the only one contributing
and you aren't contributing.
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And If you are doing it and
the Employer isn't
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Now there are two types of account
in a Pension, 1 is Tier 1 Account
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and another is Tier 2 Account, and
all that I have mentioned until now
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is about Tier 1 Account. You receive
Tax Benefits in Tier 1 Account only.
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But in the Tier 2 Account, you receive
some benefits. For eg: There is
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no lock-in period for you.
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You can invest as much as you want
and withdraw whenever you want.
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There is no minimum investment,
Invest INR 10/- instead of INR 500/-
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There is no issue.
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However, there is a catch here, that
you won't receive any benefits on tax
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This is fully taxable. That means
this is similar to a Mutual Fund.
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Because, If we don't talk about
ELSS, then Mutual Fund works
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exactly like this. Invest as much
as you want and withdraw
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whenever you want. When you withdraw
it will be considered as an Income.
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and tax will be levied on that.
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And to create a Tier 2 Account,
you need to have a Tier 1 Account
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that too active Tier 1 Account,
or else you won't be able to
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open Tier 2 Account.
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Now the question is How do you
open the account?
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Then you visit any Bank, tell them
you want to open an NPS Account.
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Submit your necessary documents,
and your Account will be opened.
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The Bank will provide you with a
PRAN i.e., Permanent Retirement
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Account Number. Just like you have
a PAN Number, likewise you will
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have a PRAN Number and this
quite similar to EPF's UAN Number.
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That means you will have one PRAN
always, and your contribution will
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be mapped under the same thing.
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And If you wish to promote
Digital India, then you can open
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the account Online, which can be
opened by visiting the ENPS Website
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I will mention the link in the
description below.
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It's a simple form, you need to
fill that. Your AAdhar Number should
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be linked to your Mobile Number
because you will receive an OTP.
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And If that is so, then your
NPS Account can be opened online
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And you will receive your
PRAN at your home via courier.
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I hope you might have found
all the information to NPS
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quite useful and in the next
few videos, I will show you the
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comparison between about NPS V/S EPF,
about NPS V/S PPF
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I will show you how to calculate
NPS. That means how much will
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you contribute monthly and until
when will you contribute
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After that your fixed pension
might get accumulated or
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until then how much will be
the corpus that you will then
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be able to withdraw. We will
understand all this calculation
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in-depth in the upcoming videos.
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You won't have to do anything
for that.
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Law Advisor and hit the bell icon.
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