Indian Bank was formed in March 1907 and has been providing banking solutions to individuals ever since it was formed. In April 2020 the bank was merged with Allahabad Bank and today Indian Bank and Allahabad Bank are working as a single amalgamated entity.
Among the range of banking products offered by Indian Bank, one product is the National Pension Scheme (NPS). Indian Bank allows its customers to apply to the NPS scheme and create their retirement corpus. Let’s understand the details about the NPS scheme in Indian Bank.
In this article
National Pension Scheme – the concept
The National Pension System (NPS) was launched by the Government as a retirement planning tool. The scheme helps you save regularly towards a retirement corpus so that when you retire you can avail pension payments from the accumulated corpus throughout your lifetime. The NPS scheme is market-linked in nature allowing your investments to grow in tandem with market performance thereby giving you inflation-adjusted returns. Lastly, the scheme also earns you tax benefits on investments making it tax effective in nature.
Salient features of Indian Bank NPS scheme
Here are some of the important features of the Indian Bank NPS scheme for your knowledge –
- The scheme is an annual investment scheme wherein you are required to make the minimum contribution every financial year
- The scheme runs till you reach 60 years of age. You also have the option to extend the scheme’s tenure by another 10 years and receive the benefits at 70 years of age
- There are two kinds of accounts – Tier I and Tier II. You have to open a Tier I Account to invest in NPS in Indian Bank. Tier II account, on the other hand, is optional and can be opened if you already have a Tier I Account
- For investments, there are two strategies – Active and Auto. The active Choice strategy is wherein you choose your investment funds and under Auto Choice, the funds are selected for you
- There are three main types of investment funds under the Indian Bank NPS scheme. They are Asset Class E, C and G. E is the equity fund while C and G are debt funds
- There are different pension fund managers. You can choose your manager and also switch between the available fund managers whenever you want
- Tier I Account does not allow withdrawals before maturity except in specific financial circumstances wherein you can withdraw up to 25% of the fund value partially
- Tier II Account is freely withdrawable
- On maturity, you can get up to 60% of the corpus in a lump sum through commutation. This commuted amount would also be tax-free
- Pensions are then paid from the remaining corpus in different modes which you can choose
How to invest in Indian Bank NPS?
To invest in the National Pension Scheme, Indian Bank offers you the facility of applying through its branches. Indian Bank is an authorized Point of Presence as notified by the Pension Fund Regulatory and Development Authority (PFRDA). Some of its branches are designated as Point of Presence Service Providers (POP-SPs) and you can visit these branches to apply for the NPS scheme in Indian Bank. The list of branches that serve as POP-SPs can be found at https://npscra.nsdl.co.in/pop-sp.php. Just enter your State and location and you would be able to check out the list of branches of Indian Bank wherein you can apply for the NPS scheme. To apply, follow the given steps –
- Get the subscriber registration form from the branch and fill it up stating all the necessary details
- Fill up the NPS contribution slip available at the branch detailing the amount being deposited and the NPS account to which you want to subscribe to
- Submit your KYC documents with the registration form. These documents include your identity proof, age proof, address proof and recent passport-sized coloured photographs
- Pay the applicable bank charges for subscribing to the NPS scheme
- Pay the amount of contribution towards the NPS account
The bank would, then, process your details and open your NPS account. You would also be allotted a Permanent Retirement Account Number (PRAN) using which you can check your NPS account and track your investments. You can also transfer your NPS account to another branch or financial institution if needed using the PRAN.
To be able to subscribe to the NPS scheme in Indian Bank, you should be aged between 18 and 65 years and should be an Indian citizen. NRIs can also apply to the Indian Bank NPS account.
The minimum contribution needed to open a Tier I Account is Rs.500 and for Tier, II Account is Rs.1000. once the account is opened, you should contribute a minimum of Rs.500 in Tier I and Rs.250 in Tier-II account every account so that your account is operative in nature.
Tax benefits of Indian Bank NPS
As mentioned earlier, the NPS scheme is tax-saving in nature. You can get the following deductions when you invest in the Indian Bank NPS scheme –
- Deduction under Section 80 CCD (1) up to a maximum of Rs.1.5 lakhs
- Deduction under Section 80 CCD (1B) up to a maximum of Rs.50, 000 over and above the deduction availed under Section 80 CCD (1)
- Deduction under Section 80 CCD (2) up to 10% of your basic salary and dearness allowance if your employer contributes towards the NPS scheme on your behalf
Furthermore, any partial withdrawal done from Tier I Account, subject to terms and conditions, would be allowed as a tax-free income. The commuted corpus on maturity would also be a tax-free benefit in your hands. Annuity payments, however, would be considered as taxable income and they would be taxed in your hands at your income tax slab rates.
So, understand how the NPS scheme works and then invest in it through Indian Bank for saving for your retirement.