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240 private firms are offering NPS

The subscription is growing as companies are not just enrolling new recruits but also offering this option to existing staff

August 29, 2012 4:32 IST | India Infoline News Service
Private companies are increasingly introducing PFRDA’s (Pension Fund Regulatory and Development Authority) flagship product called National Pension Scheme (NPS). About 240 private firms are now offering this defined contribution-based retirement scheme to new as well as existing employees, according to media reports.

In 2004, PFRDA introduced NPS for new recruits of central government to start with and then rolled out for state governments and public sector enterprises. In December 2011, PFRDA launched a separate model to provide NPS to all public and private sector employees in India. This model is called NPS—Corporate Sector Model.

According to pension regulator, about 240 private companies are now offering this defined contribution-based retirement scheme to new as well as existing employees. The subscription is growing as companies are not just enrolling new recruits but also offering this option to existing staff, PFRDA said. The scheme can be run parallel to superannuation, gratuity, provident fund and any other pension schemes offered to the employees of organised entities.

Companies like Reliance Industries, Wipro, Cognizance, Pantaloon, ICICI Bank, Axis Bank and Kotak Mahindra Bank have enrolled in NPS. There is an increasing trend among private companies to offer NPS as the scheme offers a wide variety of investment option.

NPS gives subscribers the option to choose how their money is invested. Employees can invest in Asset Class E that is up to 50% in equity and remaining in corporate or government debt or both. If an employee is not an aggressive investor, then he can choose Asset Class G (100% in government debt) or Asset Class C (100% in corporate debt). Corporate may select pension fund manager for its employees or leave the option to employees for selecting PFM for themselves.

According to Pravin Chordia, product manager-financial products division, India Infoline, “Under the revised draft of the DTC (Direct Taxes Code), NPS is proposed to be brought under the EEE (exempt-exempt-exempt) method of taxation. This means that investors get a tax exemption at all three stages of investment, appreciation and withdrawal.”

A low-cost product, NPS allows you to view your NPS account statement 24x7 on Central Recordkeeping Agency. All transactions can be tracked online through CRA system. Employee can check fund and contribution status through CRA website.

Employee can claim the self contribution subject to the Rs. 1 lakh limit under Section 80C but will also be able to claim deduction on employer contribution to NPS above the Rs. 1 lakh limit. NPS offers portability—employees don’t need to transfer their pension account every time they switch jobs, he added.

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