The current interest rate on the National Pension Scheme (NPS) as of February 2020 ranges from 9% to 12% depending on the type of scheme and subscriber.
Tier I subscribers of the NPS scheme are required to make a minimum initial contribution of Rs 500 at the time of registration after which subscribers can contribute a minimum of Rs 500 per contribution. However, Tier I subscribers are required to contribute at least Rs 1,000 during the financial year.
The minimum initial contribution for Tier II NPS subscribers, on the other hand, is Rs 1,000. The minimum amount per contribution for Tier I subscribers is Rs 250.
As per Section 80CCD (1) of the Income Tax Act, individual subscribers of the National Pension Scheme (NPS) are eligible for tax benefits up to 10% of the gross income until Rs 1.50 lakh under Section 80 CCE. Also, individual Tier I NPS subscribers are eligible for additional tax benefits under Subsection 80CCD (1B) of the IT Act, 1961. Subscribers can avail deduction up to Rs 50,000 on investments made towards the NPS scheme above the tax deduction available under Section 80C of the IT Act.
Annuity refers to the amount an NPS subscriber would receive from the Annuity Service Provider (ASP). The subscriber will be required to decide the percentage of pension wealth to be utilised for the purchase of Annuity.
While the minimum percentage of the pension amount to be used for the purchase of the Annuity in the case of Superannuation is 40%, pre-mature exits from NPS require at 80% of the pension wealth to be used for purchasing an annuity from the ASPs.
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