National Pension System

You can approach the points of presence service providers (POP-SP), where you can invest in the new pension scheme. You have to apply for a permanent retirement account number. (PRAN)

Over 900 Branches of Public and Private sector banks are the main points of presence (POP-SP).You can also open a new pension scheme account at the post office.

Your money is invested in the new pension scheme under the active choice or the auto choice option.

If you choose the active choose option, your money is invested in these 3 asset classes :

Asset Class E : Invests in equity. The investment in equity is of high risk.

Asset Class C : Invests in fixed deposits, public sector bonds, corporate bonds and liquid funds. The investment in fixed income securities is of medium risk.

Asset Class G: An investment in Government Securities. The investment in Government security is very safe.You can choose the proportions to invest in these assets. A maximum of only 50% can be allocated to equity

If you do not opt for the active choice, you are given the default option called the auto choice.

If you are between 18-36 years of age you are automatically assigned 50% in equity (Asset Class E), 30% in fixed deposits, public sector bonds, corporate bonds and liquid funds (Asset Class C) and 20% in Government securities (Asset Class G).

After you complete 36 years of age, the allocation towards highly safe government securities (Asset Class G), goes on increasing and the equity component goes on decreasing. This is necessary to preserve the value of the portfolio (investment).

At 55 years the allocation towards government securities (Asset Class G), is 80% with Asset classes C and E accounting for the remaining 20%.

You get deduction of INR 1.5 Lakhs under Section 80 CCD which has been raised from the limit of INR 1 Lakh as per the Budget 2015-16.

You get a total deduction under Section 80C, Section 80 CCC and Section 80 CCD combined up to INR 2 Lakhs per year. Your withdrawals from the new pension scheme are taxed under the EET regime. You get tax concessions for your investment and returns (amount your corpus increases), in the new pension scheme plan.

The 60% lump sum at withdrawal (maturity of the scheme), is added to your taxable salary and taxed as per the income tax slab you fall under. The returns from the immediate annuity (pension), are added to your taxable salary and taxed as per the income tax slab you fall under.

The new pension scheme has tax deductions up to INR 1 Lakh under Section 80 C of the income tax act. If the employer contributes 10% of the basic salary and the dearness allowance to the new pension scheme of the employee, this amount gets a tax deduction up to INR 1 Lakh per annum over and above the benefits of Section 80 C. The employer gets tax benefits under Section 36 I (1V A) for his contribution.