Urban Money

NPS Calculator

The Urban Money NPS Calculator assists a potential investor in getting an in-depth analysis of the profits gained, monthly pension, maturity and pension amount. This calculator will also give you a fair idea about your monthly investment to receive the desired amount upon retirement. The amount collected upon maturity depends on your total investment and returns generated.

Quite simply, the more amount you invest, the more the accumulated sum and the greater the final return upon maturity. The Urban Money Money National Pension Scheme has a smartly created debt and equity option, which helps you comprehend your expected returns on the basis of your appetite for risk. Thus, Urban Money is the most reliable tool for making an informed NPS investment decision.

What is the National Pension Scheme?

The National Pension Scheme (NPS) is a government-provided scheme available to all employees from the public and unorganised sectors. In this scheme, subscribers are eligible to make a minimum contribution of Rs. 6,000 annually, which can either be paid as a lump sum amount or in denominations of Rs. 500 per month.

Under this scheme, the subscriber’s contribution is reinvested into market-linked investment products like equity and debt. The return of this scheme depends on the performance of these investment options. Currently, the NPS interest rate is 8% to 10% of the contribution made.

Any Indian citizen between the age of 18 years and 60 years is eligible to open an NPS account. In accordance with the rules set by PFRDA, an NPS contribution matures when the subscriber reaches the age of 60 and can be extended up to 70 years.

This scheme also has a provision enabling subscribers to withdraw up to 25% of the total amount after three years. However, this provision is only available in certain situations, like purchasing a home, sponsoring education or medical treatment for critical illness.

Benefits of Using the National Pension Scheme Calculator

Given below are some of the benefits and salient features of the Urban Money National Pension Scheme Calculator:

  • This online calculator is very convenient and easy to use.
  • The Urban Money Calculator will also help you determine the exact amount you will receive a pension.
  • It will also display the amount invested during the accumulation period, total interest accrued and total funds generated upon maturity.
  • The calculator helps to save the user’s time as it does not involve any manual calculations, bearing accurate results.
  • You will gain a clear understanding of how much investment you will need to make to reach the desired maturity amount. It aids you in planning your finances more efficiently.

What is the Formula for Calculating National Pension Scheme Amount?

Just like all other pension schemes, NPS also uses the compounding interest rate to provide returns to the subscriber. Given below is the formula for NPS Calculator:

A=P (1+r/n)^nt

In this formula:

  • A is the total amount.
  • P is the principal sum.
  • N/n is the number of times compound interest is applied.
  • T/t is the tenure.

Let us understand this formula with the help of an example:

Suppose Arya is 34 years old and makes a monthly contribution of Rs. 3,000 to the NPS scheme. She will be required to make these contributions for 26 more years. Given that the rate of interest is 10% per annum, the following will be the details of the investment scheme:

Total Principal Invested = Rs 9.36 Lakh

Sum expected at the time of maturity = Rs 44.35 Lakh

How to Use the NPS Calculator?

Given below is the step-by-step process for using the Urban Money National Pension Scheme Calculator:

Step 1: Enter your Date of Birth. Based on this, the NPS calculator will determine the number of years you will have to make contributions to reach your desired retirement amount.

Step 2: Enter your investment amount. This will be the amount that you will be willing to contribute per month.

Step 3: Enter your expected ROI (Return on Investment).

Step 4: Mention the percentage of the annuity to be purchased. This is the percentage amount that you would like to reinvest to acquire an annuity upon retirement. In this scheme, annuity refers to the amount of money the subscriber will receive upon retirement.

Step 5: Enter the expected annuity rate. This is the amount of annuity you want to receive from your pension.

Step 6: Once you have entered all the details, the NPS calculator will automatically calculate the expected lump sum payout and the pension amount you will be liable to receive.

How to Invest in the National Pension Scheme?

The Pension Fund Regulatory and Development Authority of India is responsible for regulating the operations of the National Pension Scheme. You can open an NPS account offline as well as online. Let us take a look at how you can invest in the NPS:

Online Method

Any individual can now open an NPS account in a quick and hassle-free manner on the eNPS platform if they have already linked their account to PAN, Aadhaar and mobile number. Given below are the steps to do so:

Step 1: Visit the official eNPS website.

Step 2: Choose the applicable subscriber type from corporate or individual subscribers.

Step 3: Choose the relevant citizenship status of the subscriber.

Step 4: Select either both accounts or Tier 1 account type. This is crucial for long term savings.

Step 5: Choose your bank and enter the bank details.

Step 6: Click on the registration option and select the ‘Register with Aadhaar’option.

Step 7: Enter your Aadhaar number and click on the ‘Generate OTP’ button. This will trigger an OTP being sent to your registered number.

Step 8: Enter the OTP along with the bank details, personal information and nomination details.

Step 9: Once you have submitted the application form, you will be allotted the Permanent Retirement Allotment Number (PRAN).

Step 10: Once the subscriber submitted the e-signature and photograph, an OTP will be sent to the registered phone number.

Step 11: Verify the OTP and signature to continue making the payment.

Step 12: This will redirect you to the payment gateway. Make the required payment via the net banking option.

Step 13: The Permanent Retirement Account Number will be generated once the payment is completed.

Offline Method

To open an NPS account offline, the applicant will be required to obtain the form from the nearest POP and submit it with completed KYC papers. Once the first investment has been made, the Point of Presence will send you the PRAN. While this is the process for Indian citizens to open an NPS account offline, NRIs have to follow a different method as mentioned below:

  • Choose if the bank account is repatriable or non-repatriable.
  • Provide the NRE or NRO bank account details along with a scanned copy of the passport.
  • Choose the relevant correspondence address, i.e. the permanent address.
  • The applicant will need to proceed further with the process once the PRAN has been allotted.
  • The applicant is then required to choose the e-sign option from the E-sign/print and courier page.
  • Verify with the OTP that is sent to your registered mobile number. Please note that the registered number should be linked to your Aadhaar card.
  • After the Aadhaar authentication, duly sign the registration form.

Benefits of NPS Investment

Given below are some of the benefits of investing in the National Pension Scheme:

Returns 

A percentage of the contribution made towards your NPS account is invested in equity or debt options, which offer higher returns as compared to other investment options. With an effective interest rate of 9% to 12%, this scheme is ideal for individuals who want to generate wealth in a relatively secure manner.

Tax Benefits 

The contribution made to an NPS scheme is eligible for tax exemption up to a maximum of Rs. 1.5 lakhs in accordance with Section 80C of the Income Tax Act. The contributions made by both the employees and employers are eligible for tax exemption.

Premature Withdrawals and Exit Rules 

Under the National Pension Scheme, it is compulsory to invest in the scheme until the subscriber reaches the age of 60. However, the member is allowed to make partial withdrawals post three years of opening the account. 

The NPS members are eligible to withdraw up to 25% of the contribution made. However, this provision is only available in certain situations, like sponsoring education, medical emergencies, purchasing a house, etc. The withdrawals can be made three times in intervals of 5 years during the entire tenure.

Withdrawal Rules After 60 

Under the NPS program, the subscriber is not allowed to withdraw the entire collected fund after retirement. It is mandatory for the subscriber to keep at least 40% of the funds in the account to receive a regular annuity from a PFRDA approved insurance firm. The remaining 60% of the amount is tax-free.

Equity Allocation 

Under the NPS plans, investments are divided into various different kinds of options. According to the equity allocation rules, subscribers can invest a maximum of 50% of their investment in debt or equity options. 

There are two choices to make investments, i.e. auto choice and active choice. If the subscriber goes for active choice, they get to choose the fund and split investment according to their appetite for risk. On the other hand, in auto choice, the investments are made automatically based on the subscriber’s age and risk potential.

Risk Assessment 

Presently, there is a cap of 50% to 75% on the equity investment exposure of the NPS scheme. The cap is set at 50% for government employees, wherein the equity balance is reduced by 2.5% starting from the year the subscriber turns 50. This forms a balance of the risk to return ratio for the investor, which means that the investment is safe from the volatility of the share market. The scheme offers a higher return potential with respect to other fixed income schemes.

It is Voluntary 

The NPS program is a completely voluntary scheme. According to the rules of this scheme, a subscriber can contribute any amount they want anytime during a particular financial year.

Flexible 

The NPS scheme is flexible. Subscribers are free to choose their own investment and pension fund and watch their investments multiply.

Simple 

It is very easy and hassle-free to make contributions to your NPS account. Subscribers can easily open an account by visiting the official eNPS website.

Regulated 

The NPS scheme is controlled and regulated by the PFRDA of India. The NPS offers subscribers reliable and transparent investment opportunities owing to active monitoring and verification.

National Pension Scheme Eligibility Criteria

Given below are the eligibility criteria for investing in the National Pension Scheme:

  • Any Indian citizen is eligible to invest in the NPS.
  • The minimum age to be eligible is 18 years, whereas the maximum age to open an account is 65 years.
  • The applicant should be completely KYC compliant.
  • The subscriber should not have a pre-existing NPS account.

Documents Required for NPS Account

Given below are the documents that you will be required to submit to apply for the NPS:

  • Completed application form.
  • Identity and Address Proof Documents: 
    • Passport 
    • Ration Card
    • Voter ID card
    • Driving Licence
    • PAN Card
    • Aadhaar Card

NPS Tax Benefits

The National Pension Scheme has provisions for tax exemptions for the contribution made towards the scheme up to a limit of Rs. 1.5 lakhs in accordance with Section 80C of the Income Tax Act. Given below are some of the finer details of the tax exemptions available with NPS:

  • Section 80CCD(1): This section is regarding the self-contribution to the NPS account. A maximum deduction of up to 10% of the salary is available for tax exemption under this section of the Act. For self-employed taxpayers, the limit is 20% of the gross income.
  • Section 80CCD(2): This section pertains to the employer’s contribution to the NPS scheme. This benefit is not applicable to self-employed subscribers. The maximum contribution amount is limited to whichever is the lowest of the employer’s contribution or 10% of Basic + Dearness Allowance or Gross Total Income.

Frequently Asked Questions (FAQs)

Can a subscriber have two NPS accounts?

No, you are not allowed to have more than one NPS account. Further, there is no need to open multiple accounts as they can be easily transferred across industries and locations.

Can a subscriber make contributions in their NPS account before receipt of the PRAN card?

Yes, a subscriber can make contributions to the NPS with only the Permanent Retirement Account Number. Once the number has been allotted, the subscriber can make contributions regardless of whether they have received the PRAN card.

Who is eligible to take the National Pension Scheme?

Any Indian citizen that falls in the 18 to 60 age group is eligible to invest in the National Pension Scheme, provided that they have completed their KYC requirements.

How much can I invest in NPS?

Initially, the maximum investment amount in NPS was limited to Rs. 1 lakh. But in the Budget of 2015, it was formally raised to Rs. 1.5 lakhs.

Can I transfer the NPS account?

Yes, you can transfer the NPS account. In fact, since you are not allowed to have two NPS accounts, you are required to transfer them only in the case of a job switch.

Can I invest in NPS as well as APY?

Yes, you are allowed to invest in both NPS and APY. There is no rule barring you from the same.

Can I withdraw my NPS amount if I lose my job?

No, you are allowed to make partial withdrawals of up to 25% of your total contribution. This is only allowed for specific reasons like financing education, marriage, purchasing property, etc.

What is the National Pension Scheme (NPS) interest rate?

The NPS does not offer a fixed rate of interest for its investment plan. The rate of interest ranges from 12% to 14%, which is higher than the returns offered by other savings schemes.