NPS (National Pension Scheme Charges)

The full form of NPS is the National Pension Scheme. It is a pension scheme launched by the Government of India in 2004 and managed by the Pension Fund Regulatory and Development Authority (PFRDA) to provide long-term retirement benefits for citizens. 

It allows people to invest in various types of funds and instruments, depending on their financial goals and risk appetite. However, there are certain NPS charges associated with using this retirement scheme – these can include administrative fees, fund management fees, pension fund charges, etc. 

Understanding the various charges associated with NPS is essential for any investor who wishes to make informed decisions about their investments. 

In this article, we will take an in-depth look at the different National Pension Scheme Charges that may apply when investing in an NPS account.
 

What is National Pension Scheme?

The National Pension Scheme is designed to offer a steady source of retirement income to the citizens of India. It is a voluntary retirement savings plan that is regulated by the PFRDA (Pension Fund Regulatory and Development Authority), which all the citizens of India are eligible to hold, including self-employed Indians as well as NRIs. 

Two types of accounts are offered by the National Pension Scheme: Tier 1 and Tier 2. The Tier 1 account aims at providing long-term retirement savings and can’t be withdrawn. On the other hand Tier 2 account is flexible, and therefore, one can withdraw it at any time. Tier 2 account also serves as a voluntary savings account. 

The scheme comes with numerous investment options, including government securities, debt, and equity, among which the subscribers can select their asset allocation per their risk-taking ability. The scheme also comes with tax benefits, making it a feasible and attractive option for retirement planning. 
 

What are National Pension Scheme Charges?

National pension scheme charges involve all the expenses and fees deducted from a subscriber’s investment and contribution. The NPS charges can be partly categorised into several types, detailed in the following tables below.

National Pension Scheme Charges & Fees

NPS Point Of Presence (POP) Charges in India:

The various POP charges of NPS are given in the table mentioned below:
 

NPS Central Recordkeeping Agency (CRA) Charges in India:

The various CRA charges of NPS are given in the table mentioned below:

Other Intermediary Charges for NPS in India

Other intermediary NPS charges are discussed in the tables given below:

TRUSTEE BANK    

PENSION FUND MANAGER (PFM) CHARGES    

CUSTODIAN     

NPS TRUST

Payment Gateway Service Charges for NPS in India

Steps to Use an NPS Calculator:

Follow the given steps to get started with NPS calculation: 

●    Open any NPS calculator available online.
●    Enter the sum you intend to invest monthly in the scheme
●    Provide the details of your current age
●    Enter your expected rate of return
●    The results will instantly appear on your screen after correctly entering all the desired information. 
 

How to Make NPS Contribution?

To make an NPS contribution, one must subscribe to it. Once the subscription is completed, a permanent retirement account number will be allocated. With the help of this PRAN number, you can make monthly contributions to the pension scheme offline or online. 

Online NPS Contribution 

The first step to making an online NPS contribution is visiting the NPS official website. Then click on the contribution tab, which will direct you to the subscriber's service page, where you can put your PRAN number and other relevant information and make an online contribution hassle-free.

Minimum and Maximum NPS Tier 1 Contribution 

The minimum contribution for Tier 1 NPS required to keep the account active is Rs. 1000 per year. Contributions can be made as often as wished throughout the financial year. Also, there is no maximum limit for NPS Tier 1 contribution.

Minimum and Maximum NPS Tier 2 Contribution 

No minimum and maximum amount for NPS Tier 2 contribution has been specified for yearly contribution in the NPS scheme.   

NPS Contribution to NRIs 

As per the latest rules and regulations, NRIs must contribute a minimum amount of Rs. 500 for opening an NPS Tier 1 account. However, NRIs must contribute at least Rs to keep the account active. 6000 p.a. However, there exists no maximum limit of NPS contribution for NRIs.

NPS Contribution by Employer

As per the rules, employees working in government sectors are entitled to automatic contributions into their pension account by the government. Among employees working in the private sector, NPS contributions are less common, but they are allowed to make contributions. 

NPS Online Contribution Payment Gateway Charges

While making online NPS contributions, you must be aware of the various payment gateway charges that will be applicable. These are:

●    NPS contributions made through Internet banking are charged Rs.0.60 per transaction, excluding GST.
●    NPS contributions through the Deviot cards are charged 0.80% of the total transaction amount, excluding GST.
●    In the case of NPS contribution with a credit card, the charges are 0.90% of the total transaction amount excluding GST.

Additional NPS Online Contribution Charges 

Besides the payment gateway charges, some other charges are levied on NPS contributions. This is 0.10% of the total contribution amount ranging from a minimum of Rs. 10 to a maximum of Rs 10,000 for each contribution. This is charged apart from the payment gateway charges on using a credit or debit card for NPS online contribution. 

Offline NPS Contribution Charges 

For offline contributions through cash/cheque/demand draft through a POP-SP ( Point Of Presence Service Provider), 0.25% of the total amount is charged. Here the minimum charge is Rs. 20, and the maximum is Rs. 25,000. For instance, if the amount contributed is 1,00,000 through POP-SO, the charge will be Rs. 250 for the entire transaction. 

Age Limit for NPS Contributions 

The minimum age limit for starting an NPS contribution in the scheme is 18 years and can be done until 70. Although the maturation of the account happens at the age of 60 of the account holder, one can continue the contribution till the age of 70.

Tax Deduction on Contributions

If you have contributed to an NPS Tier 1 account, you are eligible for tax benefits, in which you can be benefited from tax deductions up to Rs. 1.5 Lakh under Section 80CCD(2) and Section 80CCD (1). Also, under Section 80CCD (1B), you are eligible for a tax deduction on an additional annual contribution of Rs. 50,000.

Example of How Tax Deduction Works with NPS

Suppose your annual gross income is Rs. 8 Lakhs, and you have contributed Rs. 2 Lakhs to NPS Tier 1. The entire amount will be eligible for a tax deduction, keeping your net income as Rs. 7 Lakhs.

Conclusion

To sum up, it is essential to understand the NPS charges meaning to safeguard your money and be aware of any extra inclusions or charges. However, you must also be knowledgeable about how to minimise NPS charges. While most of the charges are unavoidable, they can be reduced with due diligence. Conducting profound research and developing a smart plan would be beneficial.