National Pension System

What Is NPS? | National Pension System | 1 of the best Investment plans for retirement

by with No Comment Retirement

Table of Contents

Blog Introduction

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on National Pension System.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on National Pension System. This will be a complete guide on National Pension System. Please read till end of the blog post to know the complete information about this National Pension System. Lets get started.

What Is NPS?

NPS stands for National Pension System. NPS is a retirement scheme established by the Government of India for all Indian Citizens. NPS is a “Defined contribution based” retirement scheme in which the individual needs to contribute to his retirement account. Also, his employer can co-contribute for the social security or welfare of the individual. In NPS, there is no defined benefit that would be available at the time of retirement.

The retirement wealth and pension benefits depend on the contributions made and the returns generated from such contributions. This scheme is also called as “New Pension Scheme”.

NPS History

NPS was started back in 01-Jan-2004. At that time, it was only for new Central Government employees and it was mandatory for them. NPS for all Indian Citizens was introduced from 01-May-2009 onwards. At present, NPS is a mandatory for new Central and State Government employees. However, it is optional for Private employees and individuals.

Objectives Of NPS

The main aim of National Pension System is

  • To encourage people to develop the habit of savings for retirement life.
  • To provide pension throughout your retirement life.
  • To provide reasonable market based returns when you reach 60 years of age.

How Does NPS Work?

  • Open National Pension System account either as an individual or through your Employer
  • Contribute to your National Pension System account every year till you reach 60 years of age. Your employer can co-contribute as well.
  • After 60 years of age, you can withdraw a maximum of 60% of the accumulated wealth.
  • Remaining 40% of wealth should be invested in a Pension Fund.
  • The Pension Fund will provide you regular monthly pension during your retirement life.
  • Depending upon the chosen Pension scheme, the pension stops when you die or it will be given further to your spouse upon your death.

Features Of NPS

  • Launched by the Government of India.
  • Voluntary scheme for every Indian citizen.
  • Flexibility in choosing different investment options and fund managers.
  • National Pension System account is portable across locations, jobs and different sectors.
  • National Pension System is regulated by PFRDA.
  • Low account and fund maintenance charges.
  • Income tax benefits
  • Reasonable market based returns over the long term

Income tax benefits

  • There is a deduction of up to Rs.1.5 lakh to be claimed for NPS – for your contribution as well as for the contribution of the employer. – 80CCD(1) covers the self-contribution, which is a part of Section 80C.
  • The maximum deduction one can claim under 80CCD(1) is 10% of the salary, but no more than the said limit. For the self-employed taxpayer, this limit is 20% of the gross income.
  • Section 80CCD(2) covers the employer’s NPS contribution, which will not form a part of Section 80C. This benefit is not available for self-employed taxpayers.
  • The maximum amount eligible for deduction will be the lowest of the below:
  1. Actual NPS contribution by employer.
  2. 10% of Basic + DA
  3. Gross total income

You can claim any additional self contribution (up to Rs 50,000) under section 80CCD(1B) as NPS tax benefit. The scheme, therefore, allows a tax deduction of up to Rs 2 lakh in total.

Who Can Join NPS?

  • Indian citizens (whether resident or non-resident) can join NPS based on the following conditions.
  • Individual needs to be in the age group 18 to 70 years on the day of opening NPS account.
  • Citizens can join National Pension System either as an individual or as an “Employee – Employer” group.
  • You can join National Pension System even if you have already been contributing to any other Provident Fund or Pension Fund. Note that National Pension System is independent of other Funds.

Note:

  • Earlier, the maximum age to join NPS was 65 years. It was increased to 70 years in June-2021.
  • This is applicable for All Citizens Model and Corporate model only.
  • If you are joining National Pension System after 60 years of age, then you can deposit up to the age of 75 years.
  • The investment funds and Pension funds options will be same as that of those who joins before the age of 60 years.

How Do You Open NPS Account?

  • Almost all Banks (both Public and Private sector) are enrolled to open NPS account. Also, several other financial institutions provide National Pension System accounts.
  • NPS is distributed through authorized entities called “Points of Presence (POP)”.
  • POP is the first point of contact for an individual with the NPS system.
  • Almost all Banks (both Public and Private sector) are enrolled to act as Point of Presence (POP) to open National Pension System.
  • The authorized branches of a POP are known as “Point of Presence Service Providers (POP-SP)”. You need to open NPS through the POP-SP and they will assist you in opening the account and provide further details about NPS.

Documents Needed To Open National Pension System Account

The following documents need to be submitted to the POP for opening of a National Pension System account.

  • Filled subscriber registration form.
  • Proof of Identity.
  • Proof of Address.
  • Age proof or date of birth proof.

What Is PRAN Number?

PRAN stands for Permanent Retirement Account Number. When you open National Pension System, you will be issued a PRAN card and it has a 12 digit unique number. This card is generated one time and you can use it throughout your life. Even if you move from one place to another place or transfer NPS account from one POP to another POP, you can use the same PRAN number.

Types Of NPS Accounts

There are 2 types of accounts in NPS. They are

Tier 1 Account : It is a compulsory account. When you join National Pension System, this is the account that gets created for you. It is a non-withdrawable retirement account. You can withdraw from Tier 1 account only when you reach 60 years of age or when you meet exit conditions. It has Income tax benefits.

Tier 2 Account : It is an optional account. You have to have a Tier 1 account to open a Tier 2 account. It is a withdrawable account and you will be free to withdraw any amount from this account whenever you wish. No income tax benefits for this account.

NPS Account Portability

  • NPS account provides the following portability features.
  • NPS account can be operated from anywhere in India irrespective of your employment and location.
  • You can shift from one sector to another sector. For example, Private to Government and vice versa.
  • You can shift from one POP to another POP or from one POP-SP to another POP-SP.
  • You can shift from Employed to self-employed and vice versa.
  • You can contribute to National Pension System from any of the POP or POP-SP irrespective of whether you are registered with them or not.

Contribution Limits

To encourage the subscribers in all the segments of the society (including unorganised sector), PFRDA has revised and reduced the contribution limits for Tier-1 and Tier-2 accounts. These new limits are effective from 09-August-2016 onwards.

Tier-1 Accounts:

  • Minimum contribution at the time of account opening is Rs. 500.
  • Minimum amount per contribution is Rs. 500.
  • Minimum total contribution in a financial year is Rs. 1,000. (Before August 2016, it was Rs. 6,000).
  • There is no maximum limit on contribution.

Tier-2 Accounts:

  • Minimum contribution at the time of account opening is Rs. 1,000.
  • There is no minimum amount per contribution. Before August 2016, it was Rs. 250.
  • There will be no minimum total contribution in a financial year. Before August 2016, it was Rs. 2,000.
  • There is no maximum limit on contribution.

Transaction Charges

You have to pay the following charges during the tenure of NPS.

To CRA (Central Record keeping Agency):

  • Rs. 50 when you open NPS account. This is a one time fee.
  • Rs. 190 every year for Annual account maintenance cost.
  • Rs. 4 for every transaction (like contribution, address change, nominee update, etc).

To POP (Point of Presence):

  • Rs. 125 when you open National Pension System. This is a one time registration fee.
  • Rs. 20 or 0.25% of the contribution amount whichever is higher. This is an ongoing fee for every contribution starting from your first contribution.
  • Rs. 20/- for any other transaction other than contribution (for example, updating Nominee details, change of address details, withdrawal request, etc).

In-Active Accounts

A subscriber has to contribute the required minimum amount in a financial year. If not, the account will become in-active.

To activate such account, you have to pay the following fees.

  • Minimum contributions for the in-active period.
  • The minimum contribution for the financial year in which the account is re-activated.
  • A penalty of Rs.100.

To activate such in-active accounts, you have to approach POP and pay the required fees.

Who Manages Funds In NPS?

Contributions made by the subscribers are invested by Pension Fund Managers (PFM) as per the guidelines from PFRDA. The investment guidelines are designed in such a way that there is minimal impact on the subscribers’ contributions even if there is a market downturn. This is achieved by a proper mix of investment instruments like Government securities, Corporate bonds and Equities.

At present, the following Pension Fund Managers (PFM’s) manage the subscriber funds. Subscriber has option to select any one of the following pension funds.

  • ICICI Prudential Pension Fund.
  • LIC Pension Fund.
  • Kotak Mahindra Pension Fund.
  • Reliance Capital Pension Fund.
  • SBI Pension Fund.
  • UTI Retirement Solutions Pension Fund.
  • LIC Pension Fund.
  • HDFC Pension Management Company.
  • DSP Blackrock Pension Fund Managers.

Default Pension Fund Manager ( PFM )

SBI Pension Fund is the default Pension Fund Manager if the subscriber does not have any preference to choose.

Where Does NPS Invest Your Money?

NPS invests your contributions in the following 3 asset classes based on risks and returns.

Asset Class E : Investments in equity market instruments. it is classified as “High return, High risk”.

Asset Class C : investments in fixed income securities. It is classified as “Medium return, Medium risk”

Asset Class G: investments in Government securities like Government of India bonds and State Government bonds. it is classified as “Low return, Low risk”.

Fund Management Options.

NPS offers the following 2 fund management options to the subscribers.

Active choice : Subscriber will decide the asset classes and their percentage in which the contributed funds will be invested.

Asset class E – maximum of 50% only allowed.

Asset Class C – maximum of 100% allowed.

Asset Class G – maximum of 100% allowed.

Auto choice : This is the default option under National Pension System if the subscriber does not choose “Active Choice”. The management of investments under the asset classes and their percentage will be done automatically based on the age profile of the subscriber.

Fund Switching Options

  • NPS subscribers has the option to change Pension Fund Managers (PFM).
  • NPS subscribers has the option to change investment choices (Auto ot Active choice) only once in a financial year.
  • NPS subscribers has the option to change investments in Asset Class E, C and G based on Age and future income requirements.

How To Calculate Returns In NPS?

  • There is no defined or guaranteed return in National Pension System. Returns from National Pension System is market driven.
  • There is no dividend or bonus paid in this scheme.
  • Returns depends upon the chosen asset class (Equity, Government Securities and Fixed Income).
  • For every contribution you make, you will get units based on the NAV (Net Asset Value) on the day of contribution.
  • The value of your accumulated wealth is calculated by multiplying total units and NAV.

What Happens During NPS Maturity?

  • Retirement age for National Pension System scheme is 60 years.
  • Your contribution to National Pension System stops when you reach 60 years of age.
  • At least 40% of the accumulated wealth should be invested to purchase a Pension Fund. This is to receive monthly pension during your retirement life. This is compulsory.
  • You can withdraw the remaining 60% of the accumulated wealth as a lump sum amount from NPS.

If the accumulated wealth is less than or equal to Rs. 5 Lakhs, then you can withdraw the entire amount (100%) as a lump sum. You need not purchase any Pension Fund. Earlier, the limit was Rs. 2 lakhs. It was increased to Rs. 5 lakhs in June-2021.

Few options to consider: If you want, you can purchase pension fund up to 100% of the accumulated wealth. If you want, you can delay the withdrawal of eligible lump sum amount and keep invested till the age of 75 years. If you want, you can delay.

  • Only the lump sum withdrawal.
  • Only the pension.
  • Both lump sum withdrawal and pension.
  • If you want, you can opt for withdrawal of lump sum amount in phases (up to 10 instalments). But, you should purchase Pension fund before the phased withdrawal.

Extension Beyond 60 Years Of Age

  • You can voluntarily extend your contribution to National Pension System account even after the retirement age of 60 years.
  • You can continue to contribute up to 75 years of age. After that you can’t contribute further.
  • This contribution beyond 60 years of age is also eligible for exclusive tax benefits under National Pension System.
  • For extension, you can choose any period between 60 years and 75 years of your age. For example, you may want to continue your contributions till you reach 64 years of age.
  • If you are planning to extend your contribution beyond the retirement age of 60 years, then you should notify the Bank (where your National Pension System account is kept) at least 15 days before you reach 60 years of age.
  • If you have Tier-2 account, you can extend the contributions into the Tier-2 account in addition to the Tier-1 account. Please note that you can operate the Tier-2 account as long as there is a Tier-1 account.
  • During the extended contribution period, you can choose to leave the scheme at any point in time. There will not be any penalty. For example, you extended your contribution till the age of 65 years. But, at 63 years of age, you decided not to contribute any further and you want to leave the scheme. You can inform your Bank (where your National Pension System account is kept) and you can leave scheme without paying any penalty.
  • Please note that when you leave the scheme during the extended contribution period, you should purchase the Pension Fund immediately. You don’t have the option of delaying or postponing the investment into Pension Fund that provides regular monthly pension.
  • When you leave the scheme, you should invest at least 40% of the amount accumulated till the age of Exit for the purchase of Pension Fund. For example, if you leave the scheme at the age of 64 years, then you should invest at least 40% of the amount accumulated till the age of 64 years to purchase the Pension Fund.
  • During the extended contribution period, you will have all the facilities and options of a normal National Pension System account like choosing or switching the Pension Fund Manager, investment choices, etc.

Note: Contribution extension beyond retirement is applicable only to the subscribers of “All Citizens” model and “Corporate Employees” model. Please note that Government employees are not allowed to extend the contributions beyond retirement.

Pre-Mature Exit

  • Pre-mature exit is allowed if you want to retire early or if you do not want to continue National Pension System before the age of 60 years.
  • Pre-mature exit is allowed only after completion of 10 years from the date of joining National Pension System.
  • At exit, you should invest at least 80% of the accumulated wealth to purchase a Pension Fund. This will provide you the monthly pension.
  • You can withdraw the remaining 20% of the accumulated wealth as a lump sum amount.
  • At exit, if the accumulated wealth is equal to or less than Rs. 2.5 lakhs, then you can withdraw the entire amount as a lump sum. You need not purchase any Pension Fund.
  • Earlier, the limit was Rs. 1 lakh. It was increased to Rs. 2.5 lakhs in June-2021.

Partial Withdrawal

  • Partial withdrawal from Tier-1 account is allowed and the details are given below.

Eligibility: To be eligible for partial withdrawal, you should complete at least 3 years from the date of joining NPS.

Withdrawal Amount: You can withdraw a maximum of 25% of your contributions only. You can’t withdraw from your employer’s contributions.

Withdrawal Frequency: You can opt for partial withdrawal for a maximum of 3 times only during your entire tenure with National Pension System.

Documents Needed: Earlier, you had to submit the supporting documents to apply for partial withdrawal. But, in June 2021, the Government has announced that the supporting documents are not required. A subscriber can apply for partial withdrawal through self-declaration. This is to simplify the process.

Purpose: You can partially withdraw for the following purposes.

  • Higher education of your children (including legally adopted children).
  • Higher education of your children (including legally adopted children).
  • Marriage of your children (including legally adopted children).
  • Setting up a new business or purchasing a new business.
  • Purchase or construction of a residential house or flat in your name or jointly with your spouse. If you already own a house, then you can’t withdraw.
  • For the hospitalisation and treatment of the following diseases for your family. Family includes yourself, spouse, children and dependent parents.

Death Of The Subscriber

In the event of unfortunate death of the subscriber before the age of 60 years, the entire (100%) accumulated wealth will be paid to the nominee. The death claim by nominees under National Pension System is 100% tax free from 01-Apr-2016 onwards. There will not be any need to purchase the Pension Fund for monthly pension.

Documents Needed For Withdrawal

The following documents are required to withdraw funds from National Pension System.

  • Filled Withdrawal application form.
  • PRAN card in original.
  • Proof of Identity (attested copies).
  • Proof of Address (Attested copies).
  • A cancelled cheque.

What Determines The Monthly Pension?

The monthly pension amount depends mainly on

  • The size of the accumulated wealth during retirement. Bigger the accumulated wealth means bigger pension.
  • Type of pension scheme that you choose to receive.

Nomination

  • Nomination facility is available in National Pension System.
  • You can nominate either at the time of account opening or after opening the account.
  • You can nominate up to 3 nominees for your National Pension System Tier 1 and NPS Tier 2 accounts.
  • You need to specify the percentage of your savings that you wish to allocate to each nominee.
  • The total percentage of shares across all nominees should be 100%.
  • You can change nominees at any time.
  • There is no fee for nomination at the time of opening the account.
  • However, you will be charged Rs. 20/- plus tax if you want to update nominees after the account has opened.
  • You need to visit POP and place a request to update nomination details.

FAQ About NPS

Can NRI Open NPS Account?

NRI (Non Resident Indians) can open a NPS account. NRIs can continue their NPS account even if they become a non-citizen of India. OCI (Overseas Citizenship of India) can also open a NPS account.

Can I Have 2 NPS Accounts?

No. You can have only one NPS account at any time. Multiple NPS accounts for an individual are not allowed. In fact, there is no need as the NPS is fully portable across sectors and locations.

Who Regulates NPS?

PFRDA regulates the NPS system. PFRDA stands for Pension Funds Regulatory and Development Authority.

Is there any Loan Facility available From NPS account

There is no loan facility in NPS.

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Employees Provident Fund

What Is EPF? | Employees Provident Fund | 1 Best safest saving scheme for retirement

by with No Comment Retirement

Table of Contents

Blog Introduction

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on Employees Provident Fund.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on Employees Provident Fund. This will be a complete guide on Employees Provident Fund. Please read till end of the blog post to know the complete information about this Employees Provident Fund. Lets get started.

What Is EPF?

EPF stands for Employees Provident Fund. EPF is a retirement and social security scheme for the salaried employees. EPF is a “Defined Benefits” based retirement scheme in which a fraction of Employee’s salary will be contributed to his EPF account. Also, his employer will co-contribute the equal amount for the social security of the employee.

Employees Provident Fund History

EPF was started by EPFO (Employees Provident Fund Organisation) back in 1952. At that time, EPF was the only scheme for salaried class people to save for their retirement life.

Objectives Of Employees Provident Fund

The main aim of EPF is

  • To help salaried employees to save for their retirement life.
  • To provide monthly pension throughout employee’s retirement life

How Does Employees Provident Fund Work?

  • EPF account will be opened for you by your Employer when you join an Organisation.
  • 12% of your monthly Basic Pay + DA salary will be deducted and contributed to your EPF account every month by your employer.
  • Your employer will make equal 12% contributions into your EPF account every month.
  • Your contribution and your employer’s contribution will earn interest as per the interest rate (%) announced by the Government of India from time to time.
  • At retirement, you can withdraw the entire (100%) accumulated amount from your EPF account.
  • After retirement, you will receive monthly pension from EPFO throughout your life.
  • After your death, the monthly pension will be given to your spouse followed by 2 children up to their 25 years of age.

Features Of Employees Provident Fund

  • Retirement scheme for salaried employees.
  • Backed by the Government of India.
  • Safe and Guaranteed returns
  • Income tax benefits
  • Equal contribution from employer
  • Monthly pension after retirement
  • Partial withdrawal facility for important life events

How Will Your Employees Provident Fund Contribution Above Rs. 2.5 Lakhs Be Taxed?

  • From 01-Apr-2021 onwards, if an employee contributes more than Rs. 2.5 lakhs in a financial year, then any interest earned on the excess amount will be taxed.
  • It includes employee’s contributions of both EPF and VPF. It doesn’t include any of Employer’s contributions.
  • The Government has given the clarity about how your EPF contributions will be taxed.

From FY 2021-22 onwards, your EPF account will have 2 sub-accounts. They are

Non Taxable Contribution Account : This account will include the following items. closing balance in your EPF account as on 31-Mar-2021. Any amount (which is less than Rs. 2.5 lakhs) that you contribute every financial year. any interest earned on the above two items. Any interest earned from this “Non Taxble” account is tax free.

Taxable Contribution Account : This account will include the following items. Any amount above Rs. 2.5 lakhs that you contribute in a financial year from 01-Apr-2021 onwards. Any interest earned on the above item.

Any interest earned from this “Taxble” account is taxable. The interest amount will need to be declared under “Income from Other sources” and you need to pay tax as per your income tax slab. The statement that you’ll receive from the EPFO will have the “taxable” and “non-taxable” portions of the interest.

Example: Let us assume that you are going to contribute Rs. 3 lakhs into your EPF in the FY 2021-22. The interest earned up to Rs. 2.5 lakhs will be tax free. The interest earned on the remaining amount of Rs. 50,000 will be taxed as per your income tax slab rates.

What Is EPFO ?

EPFO stands for Employees Provident Fund Organisation. EPFO is a body of the Indian Government. EPFO governs the operations of the EPF scheme.

Components Of Employees Provident Fund

EPF account contains the following components.

  • EPF (Employee Provident Fund).
  • EPS (Employee Pension Scheme).
  • EDLIS (Employees Deposit Linked Insurance Scheme).

When the employer opens EPF account, the employee is automatically enrolled for EPF, EPS and EDLIS. There is no separate process for joining EPS or EDLIS.

Employees Provident Fund Contribution Limits

Contribution Limit for Employee:

  • Employee will contribute 12% of Basic Pay + DA every month and it will go towards EPF account.
  • For the purpose of calculation, a maximum of Rs. 15,000/- will be considered for monthly Basic Pay + DA even if the employee is earning more than that.
  • That is, Rs. 1,800/- (12% of Rs. 15,000/-) is the maximum monthly contribution limit for employees.
  • This is the calculation method followed by most of the Employers and EPFO Offices.
  • But, there are Employers who don’t have such limits on contributions. Please check with your Employer to know your contribution limits.

Contribution Limit for Employer:

  • Employer will make equal 12% contribution towards employee’s EPF account.
  • But, only 8.33% will go towards EPS (Employee Pension Scheme) account.
  • The remaining 3.67% will go towards EPF account.
  • For the purpose of calculation, a maximum of Rs. 15,000/- will be considered for monthly Basic Pay + DA even if the employee is earning more than that.
  • That is, Rs. 1,250/- (8.33% of Rs. 15,000/-) is the maximum monthly contribution amount towards EPS account.
  • The remaining amount (Employee’s contribution minus EPS contribution) will be the employer’s share towards EPF account.

Employees Provident Fund Account

  • It is the account to which the employee contributes 12% of Basic Pay + DA every month.
  • It is the account to which the employer contributes 3.67% of Basic Pay + DA every month.
  • Both employee and employer contributions will earn interest as per the interest rate announced by the Government from time to time.
  • This scheme earns yearly compounded interest.
  • It means interest on contributions will be calculated every month in a financial year (from April to March) and it gets credited to the account in April of next financial year.
  • Employee can withdraw the entire (100%) accumulated amount at retirement.

EPS Account

  • The purpose of this account is to provide monthly pension to the employee after retirement.
  • It is the account to which the employer contributes 8.33% of Basic Pay + DA every month.
  • However, it is restricted to a maximum of Rs. 1,250/- per month (that is 8.33% of Rs. 15,000/-). This change is effective from 01-Sep-2014.
  • Employee does not contribute any amount towards this scheme.
  • The Government of India contributes 1.17% of monthly Basic Pay + DA every month.
  • The amount in EPS does NOT earn any interest.
  • You can’t withdraw any portion of EPS when you retire. The purpose is purely to provide monthly pension.

EDLIS Account

EDLIS:

  • EDLIS provides life insurance cover to employees.
  • This scheme provides Life insurance cover to a maximum of Rs. 7 Lakhs. The minimum insurance under the scheme is Rs. 2.5 lakhs.
  • The cost of the insurance is paid by the Employer.
  • Employer will pay 0.5% of monthly Basic Pay + DA every month (to a maximum of 0.5% of Rs. 15,000) towards the premium of the life insurance.
  • Employee is covered under this scheme from the first day of employment.
  • The life insurance coverage of an employee is purely based on his monthly Basic Pay + DA.
  • The Life Insurance cover is irrespective of whether employee dies during working hours or non-working hours.
  • The life insurance cover is irrespective of the cause of death of the employee.
  • There is no exclusions under this scheme.

How much is the coverage?

Your insurance coverage is 35 times of average of last 12 months’ Basic Pay plus DA. In addition, there will be Rs. 1.75 lakhs as a bonus.

Your coverage = [(average of last 12 months’ Basic + DA) x 35] + 1,75,000

For this calculation, a maximum of Rs. 15,000 will be considered as your last 12 month’s average Basic Pay + DA.

The bonus amount is based on 50% of the average balance in the account during the 12 months before the death of employee. The maximum allowed bonus amount is Rs. 1.75 lakhs

The nominee or legal heirs can claim this insurance amount following the death of the employee.

Employers have the choice of opting out of EDLIS and go for “Group Insurance” scheme. But, it should be approved by EPFO and the life coverage from Group Insurance scheme should be equal to or more than the coverage provided by EDLIS.

Employees Provident Fund Account Admin Charges

PF account admin charges are paid by the employer. Employer will pay 0.85% of Basic Pay + DA every month towards PF account admin charges. Employer will pay 0.01% of Basic Pay + DA every month towards EDLIS admin charges.

Employees Provident Fund Interest

Both employee and employer contribution towards EPF account will earn interest as per the interest rate from time to time. But, employer contribution towards EPS account will NOT earn any interest.

Employees Provident Fund Compounding Frequency

PF account follows yearly compounding frequency. It means that interest on contributions will be calculated every month in a financial year (from April to March) and they gets credited to the account in April of the following financial year.

What is VPF ?

VPF stands for Voluntary Provident Fund. VPF is an additional contribution facility for employees. In VPF, employees can contribute more than the compulsory 12% of Basic Pay + DA every month. But, employer will not match additional contribution by employee.

Employer will stick with the compulsory contribution of 12% Basic Pay + DA every month. Income Tax benefits on VPF will be same as that of the EPF only. No additional benefits for VPF.

Retirement Age

We need to know the retirement age for 2 things.

  • Retirement age for EPF : The minimum retirement age for Employees Provident Fund is 55 years. There is no fixed retirement age for Employees Provident Fund in Private Sector Organisations. It can be 55 years, 58 years, 60 years or even more. When the employee reaches the designated retirement age, he can withdraw the entire (100%) accumulated amount in Employees Provident Fund account. This will be the total of employee contribution, employer contribution and interest earned on both. Upon complete withdrawal, the EPF account will be closed and you are no longer a member of Employees Provident Fund.
  • Retirement age for EPS: The retirement age is 58 years for EPS benefits. It means, when the employee reaches 58 years of age, the employer contribution to EPS stops. Employee will be starting to get monthly pension immediately. In case, employee’s EPF retirement age is more than 58 years, then the entire 12% contribution from employer will go towards Employees Provident Fund account.

In-Active EPF Accounts

If an Employees Provident Fund account does not receive contributions for a consecutive period of 3 years (36 months), then it is considered as “In-active” account.

The in-active situation generally arises when an employee forgets to withdraw or transfer the PF amount due to job transfer reasons.

Such in-active EPF accounts can be withdrawn or transferred to existing Employees Provident Fund accounts.

From 01-Apr-2016 onwards, any in-active Employees Provident Fund account will earn interest as per the interest rate announced by the Government of India from time to time. Note that EPFO stopped paying interest to in-active accounts from April, 2011.

Recently, EPFO launched “Inoperative A/c Helpdesk” facility on its website http://www.epfindia.com

You can check for your in-active accounts using this facility and make a provision to withdraw or transfer the funds to existing PF account.

What is UAN?

UAN stands for Universal Account Number. Till October, 2014, every employee was given a PF Account number by their employer. If you change your job, then you used to get a new PF Account number. Maintaining multiple account numbers was a problem for many employees.

Quite a few employees forget to withdraw or transfer PF amount due to frequent job changes. To address these issues, EPFO came up with UAN (Universal Account Number) concept. With UAN, you will have only one PF account number even if you change your job multiple times.

When you change your job, just provide your UAN to your new employer. All your PF accounts will come under one umbrella.

UAN Benefits: In addition to this, UAN number provides the following benefits

  • You can view and update your profile.
  • You can download and print your UAN Card.
  • You can download your latest EPF Passbook.
  • You can check various PF Member Numbers allocated by your previous employers under UAN.
  • You can lodge and view transfer claims.
  • You can update KYC (Know Your Customer) details.

UAN Website: To get the above mentioned benefits, you need to register for UAN .

How To Check EPF Balance?

You can check your EPF balance in the following ways.

  • Annual Statement.
  • EPF Mobile App.
  • EPF Balance by SMS.
  • EPF Passbook.
  • UAN Number.

EPF Partial Withdrawal Rules

Employee can partially withdraw from PF account for the following reasons.

  • Purchase of House, Flat or Construction of house.
  • Purchase of Site.
  • Additions, Alteration, Improvements in house – First Time
  • Additions, Alteration, Improvements, Repairs in house – Second Time
  • Repay loan taken for purchase of site or house or construction of house
  • Medical treatment or disease
  • Marriage
  • Education of Children
  • Natural Disasters
  • Cut in Electricity Supply
  • Physically handicapped employees
  • Some special cases
  • Just an year before retirement
  • Withdraw at the age of 55 years
  • Unemployed for more than a month

Employees Provident Fund Full Withdrawal Options

There are many situations in which an employee can withdraw his entire (100%) balance in PF account. They are given below.

  • retirement from service after reaching the age of 55 years.
  • employee is unable to work due to permanent disability. Employee should produce Medical. Certificate from Doctor stating that employee is totally disabled and unable to work.
  • employee is migrating to a foreign country for permanent settlement or employment reasons.
  • employee’s job is terminated by employer due to layoff or redundancy reasons.
  • employee opts for VRS (Voluntary Retirement Scheme)
  • company is closed but the employee is transferred by the employer to another company which is not covered under EPF Act, then employee can withdraw entire (100%) PF balance after a period of 2 months
  • employee is transferred to another company (with the same employer) and if it is not covered under EPF Act, then employee can withdraw entire (100%) PF balance after a period of 2 months
  • employee’s service is terminated and he does not get another job for a continuous period of 2 months. Note that the 2 months waiting period will not be applicable for female employees resigning the job for the purpose of getting married
  • If an employee withdraws full (100%) PF amount after resigning from job, his EPF membership will be terminated. It means he is not a member of EPF scheme after the full withdrawal.

Employee Death Benefits

In case of death of the employee, the nominees can claim the following benefits.

Death before retirement: Entire accumulated amount in PF account. This will include total employee contributions, total employer contributions and interest earned on both. This will be a lump sum amount. Insurance coverage amount provided by EDLIS account. This will be a lump sum amount.

Monthly pension under EPS account. This is a regular monthly pension to spouse and 2 children below 25 years of age.

Death after retirement: Monthly pension under EPS account. This is a regular monthly pension to spouse and 2 children below 25 years of age.

Withdrawal Process

Earlier, withdrawal from EPF was a lengthy process for employees. Now, it is made simple with the help of UAN. If the employee had activated UAN, then employee can submit the withdrawal request directly to EPFO office. This helps Employees to withdraw from EPF without the employer’s signature or involvement.

Employee Death Benefits

In case of death of the employee, the nominees can claim the following benefits.

Death before retirement: Entire accumulated amount in PF account. This will include total employee contributions, total employer contributions and interest earned on both. This will be a lump sum amount.

Insurance coverage amount provided by EDLIS account. This will be a lump sum amount.

Monthly pension under EPS account. This is a regular monthly pension to spouse and 2 children below 25 years of age.

Death after retirement: Monthly pension under EPS account. This is a regular monthly pension to spouse and 2 children below 25 years of age.

Withdrawal Process

Earlier, withdrawal from EPF was a lengthy process for employees. Now, it is made simple with the help of UAN. If the employee had activated UAN, then employee can submit the withdrawal request directly to EPFO office. This helps Employees to withdraw from EPF without the employer’s signature or involvement.

Job Change

It is advisable to transfer PF amount to your new employer following a job change.

Is Employees Provident Fund Compulsory? Can I Opt Out?

  • EPF is compulsory for an employee if his monthly Basic pay + DA salary is less than Rs. 15,000/-.
  • Note that earlier the limit was Rs. 6.500/-. This change was effective from 01-Sep-2014 onwards.
  • An employee can opt out of EPF if his monthly Basic pay + DA is more than Rs. 15,000/- at the time of joining the organisation.
  • If an employee wants to opt out of EPF, then he has to do at his very first employment.
  • Once an employee becomes a member of EPF and he contributes to EPF even for a single month, then he has to continue with EPF. He can’t opt out.
  • In case if an employee opts out of EPF, then there will not be any EPF deduction from salary. It means you will get all salary components in hand.

EPS – Employees Pension Scheme

  • Under EPS scheme, employee will receive monthly pension after retirement.
  • Employee is eligible for pension only when he reaches 58 years of age and has completed 10 years of service.
  • Employee is eligible for pension whose age is between 50 years and 58 years and has completed 10 years of service. However, it is at a discounted rate of 4%.
  • There is no pension for an employee before the age of 50 years.
  • Under this scheme, the employee will receive monthly pension throughout his life. After his death, the monthly pension will go to spouse followed by 2 children up to their age of 25.

Nomination

  • Nomination facility is available in Employees Provident Fund.
  • Nomination is required to settle the benefits in case of death of the employee.
  • Employee can nominate either at the time of joining Employees Provident Fund or thereafter.
  • Employee can nominate his/her spouse, children, dependent parents and expired son’s widow and children. Employee can’t nominate brother or sister.
  • An employee who doesn’t have a family can nominate any person. However, this will become invalid once the employee gets married and acquires his/her family.
  • When employee nominate multiple people, the percentage of sharing of benefits should be mentioned. The total percentage should not exceed 100%.

FAQ About Employees Provident Funds (EPF)

What Is Salary In EPF?

Employee’s salary may have many components. But, for the purpose of EPF, salary means Basic Pay + DA (Dearness Allowance).
Salary = Basic Pay + DA.

What is the EPF Interest Rate (%)?

The current annual interest rate of the PF scheme is 8.10% for the financial year 2021-22. That is, for the period from 01-Apr-2021 to 31-Mar-2022.
Interest rate of PF account is not fixed and it is determined by the Government of India from time to time.

Is there any Income tax benefits in EPF?

Yes . An employee’s contribution to the EPF account is allowed as a deduction up to Rs 1.5 lakh under Section 80C of the IT Act. 

From FY 2020-21 onwards, the employer’s contribution to the EPF account shall become taxable if the contribution to EPF, NPS and/or superannuation fund exceeds Rs 7.5 lakh in a financial year. The excess contribution will become taxable. The employer needs to calculate the amount that will be taxed as a prerequisite, and this will be reflected in the employee’s Form 16.

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Atal Pension Scheme

What is Atal Pension Scheme (APS) ? | 1 Best retirement scheme for all Indian citizens

by with No Comment Retirement

Table of Contents

Blog Introduction

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on Atal Pension Scheme.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on Atal Pension Scheme. This will be a complete guide on Atal Pension Scheme. Please read till end of the blog post to know the complete information about this Atal Pension Scheme. Lets get started.

What Is APS?

APS stands for Atal Pension Scheme. APS is a retirement scheme for all Indian citizens. It was established by the Government of India to provide guaranteed monthly pension to all Indians after the age of 60 years. Though this scheme is for all Indians, it mainly aims at poor, under-privileged and workers in the unorganised sector.

History Of Atal Pension Scheme

During the budget for financial year 2015-16, the Prime Minister of India announced various Pension and Insurance schemes for all Indian citizens. Of which, one such scheme was “Atal Pension Scheme”. Atal Pension Scheme was launched by the Government of India and it was effective from 01-June-2015 onwards. This scheme was named after the former Prime Minister of India Mr. Atal Bihari Vajpayee.

Objective Of Atal Pension Scheme

The main objective of APS is to provide guaranteed monthly pension to people of unorganised sector after the age of 60 years. Encourages all Indian citizens to plan for their retirement life.

How Does Atal Pension Scheme Work?

  • Open APS account in a Bank.
  • Choose the monthly pension you want to receive after the age of 60 years. You can choose one of the monthly pensions of Rs. 1,000, Rs. 2,000, Rs. 3,000, Rs. 4,000 or Rs. 5,000.
  • According to your chosen monthly pension, the contribution amount will be decided. You can pay the contribution monthly, quarterly or half-yearly basis.
  • Pay the contribution amount as per the chosen payment frequency till you reach 60 years of age.
  • After 60 years of age, you will receive the guaranteed monthly pension till the end of your life.
  • After that, your spouse will receive the same guaranteed monthly pension till the end of her/his life.
  • After that, your Nominees or Legal Heirs will receive the accumulated pension wealth. That is, your contributions and returns earned on them. This amount is pre-defined when you join the scheme

Features of Atal Pension Scheme

  • Established by the Government of India.
  • Pension scheme for all Indian citizens.
  • guaranteed minimum monthly pension to you and your spouse.
  • your nominees will receive the accumulated pension wealth following the death of both you and your spouse.
  • Income tax benefits.
  • Additional contributions from Government for the people of unorganised sector.

Income Tax Benefits of Atal Pension Scheme

This scheme didn’t have any income tax benefits when the scheme was launched.

But, in February 2016, the Government of India announced that this scheme will get income tax benefits. The tax benefits will be same as that of NPS (National Pension System) scheme.

Effective 01-Apr-2020, the income tax benefits will depend upon whether you choose old tax system or new tax system.

Old Tax System: Your contributions during a financial year will be eligible for tax deduction under Section 80CCD(1). This is within the overall limit of Rs. 1.5 Lakh under Section 80C. Your contributions up to Rs. 50,000 per financial year will be eligible for additional tax deduction under section 80CCD(1B). This is over and above the limit of Rs. 1.5 Lakhs under Section 80C.

Monthly Pension received during your retirement life is taxable. You need to declare the monthly pension amount under “Income from other Sources” and pay income tax as per your income tax slabs.

New Tax System: No income tax benefits. Your contributions won’t get any deduction benefits under Section 80CCD(1) or 80CCD(1B). Monthly Pension received during your retirement life is taxable. You need to declare the monthly pension amount under “Income from other Sources” and pay income tax as per your income tax slab.

Who Can Open The Atal Pension Scheme Account?

Eligibility: The following are the eligibility criteria to join APS scheme.

  • You should be an Indian citizen.
  • You should have a Savings Bank (SB) Account with Bank or Post Office. You can open a new account if you don’t have one already.
  • Your age should be between 18 years and 40 years.
  • During the account opening, it is recommended to provide Aadhaar Card details and Mobile Number. But, they are not compulsory for account opening. You can provide them at a later stage.
  • The purpose of the Aadhaar card is for the identification of yourself (account holder / beneficiery), your spouse and your nominees to avoid pension issues and lump sum retirement wealth receival issues in the long term.

Who is eligible?

To be eligible for Government contributions, you should meet the following criteria.

  • You should open APS account during the period from 01-June-2015 to 31-March-2016 (It means that those who join on or after 01-Apr-2016 will not receive this benefit).
  • You are not an income tax payer.
  • You are not covered under any other social security scheme or employees provident fund schemes.

Who is not eligible?

You are not eligible for Government’s co-contributions if you meet any one of the following criteria.

  • You joined the scheme on or after 01-Apr-2016.
  • You are an income tax payer.
  • You are covered under any of the social security schemes or employees provident fund schemes.

How much Government will contribute?

For the eligible account holders, the Government will make co-contribution for the following 5 financial years.

  • 2015-16.
  • 2016-17.
  • 2017-18.
  • 2018-19.
  • 2019-20.

The Government contribution will be 50% of your total contribution for the financial year or Rs. 1,000/- whichever is lower.

For example, you are 30 years old and you want to receive monthly pension of Rs. 5,000/- and you want to pay contributions on a monthly basis. As per the APS contribution chart, your monthly contribution amount will be Rs. 577/-. So, your total contribution for the financial year will be Rs. 6,924/- (that is 577 x 12). In this case, Government’s co-contribution will be Rs. 1,000.

The Government deposits the co-contribution amount into your Savings Bank (SB) account in Bank or Post Office at the end of the financial year. Then, it will be transferred to your APS account by the Bank.

How Much Pension Will I Get from Atal Pension Scheme?

Under APS scheme, you have the following 5 pension options. You can choose one of the options when you open APS scheme.

  • Monthly pension Rs. 1,000.
  • Monthly pension Rs. 2,000.
  • Monthly pension Rs. 3,000.
  • Monthly pension Rs. 4,000.
  • Monthly pension Rs. 5,000.

How Much Retirement Wealth Will My Nominees Get?

After your death and your spouse’s death, your nominees will receive the lump sum retirement wealth.

The wealth chart is given below and it depends upon the chosen monthly pension.

  • Rs. 1,70,000 (for monthly pension of Rs. 1,000).
  • Rs. 3,40,000 (for monthly pension of Rs. 2,000).
  • Rs. 5,10,000 (for monthly pension of Rs. 3,000).
  • Rs. 6,80,000 (for monthly pension of Rs. 4,000).
  • Rs. 8,50,000 (for monthly pension of Rs. 5,000).

Note that the retirement wealth is pre-defined when you join the scheme itself.

Can I Change My Monthly Pension And Contribution Frequency?

  • Yes. You can change. The details are given below.
  • Can I change my monthly pension after opening the account?
  • Yes. You have the option to change the monthly pension amount after you joined the scheme.
  • But, you can do this only once in a financial year and that can be done on any month.
  • Note that your contribution amount will change according to the monthly pension you opted for.

Can I change my contribution frequency after opening the account?

  • Yes. You can change the contribution frequency (monthly, quarterly or half-yearly) as per your convenience during the term of the scheme.
  • But, you can do this only once in a financial year and that can be done on any month.

Can I Get More Than The Minimum Guaranteed Monthly Pension?

May be. There may be a possibility to get more than the guaranteed minimum monthly pension. But, it depends upon the returns earned from your contributions.

If the returns from your contributions is higher than the minimum guaranteed monthly pension, then the Government will deposit the additional returns into your account. It means more pension for you.

Worst case, if the returns from your contributions is lower than the minimum guaranteed monthly pension, then Government will bear the loss and you will still get the guaranteed minimum monthly pension.

It means that your monthly pension is guaranteed irrespective of the returns earned from your contributions.

How Much Amount Should I Contribute?

The contribution amount that you should pay will depend upon the following factors.

  • The monthly pension you want to receive.
  • Your age at the time of joining APS scheme.
  • Whether you want to pay the contribution amount monthly, quarterly or half-years basis.
  • Once your contribution amount and the contribution frequency are decided, the contribution amount will be debited from your Savings Bank account through “Auto Debit” facility by the Bank and it will be transferred to your APS account.

Penalty for Delayed Contributions in Atal Pension Scheme

  • You have to make sure that you have sufficient balance in your Savings Bank (SB) account for the contribution amount to be debited by the Bank on the specified date.

If the Bank is unable to debit the contribution amount due to “insufficient balance”, then Bank will charge you penalty amount as per the following.

  • For each delayed monthly contributions, Rs. 1/- per month for every Rs. 100/-, or part of it.
  • For each delayed quarterly and half-yearly contributions, the penalty will be calculated accordingly.
  • Note that the penalty amount collected will be deposited into your APS Account. It means that the Government will not take the penalty charges.

What if you discontinue your contributions in Atal Pension Scheme?

If you discontinue your contributions, your accumulated amount in APS account will get reduced because of deduction of account maintenance charges and fees. Due to these deductions, if the APS account balance becomes zero Rupees, your APS account will be closed immediately. If you have received co-contributions from Government, it will be paid back to the Government.

How to activate discontinued contributions in Atal Pension Scheme?

You have the option to pay delayed contributions along with penalty if the APS account balance is NOT zero Rupees. But, once it becomes zero, your account will be closed immediately and you have no way of continuing further.

Where Does Government Invest Your Contributions?

The Government of India invests people’ contributions in the following manner.

  • Government Securities – 45% to 50%.
  • Debt Securities and Term Deposits of Banks – 35% to 45%.
  • Equity and related instruments – 5% to 15%.
  • Money Market Instruments – 0% to 5%.
  • Asset Backed Securities – 0% to 5%.

Annual Interest Rate (%) And Compounding Frequency of Atal Pension Scheme

Government of India didn’t disclose the details about Annual Interest Rate (%) and Compounding Frequency details for this scheme.

Retirement Age of Atal Pension Scheme

Retirement age in this scheme is 60 years.

What happens at Retirement in this Atal Pension Scheme?

Your contribution to this scheme stops. You will receive the guaranteed monthly pension from the Bank till the end of your life.

Can NRI open Atal Pension Scheme account

NRI (Non Resident Indians) are eligible to open the account. If the NRI becomes non-citizen of India, then the account will be closed. The entire contributions and the returns earned on them will be paid to the account holder.

Nomination facility

  • Nomination facility is available and it is compulsory to nominate at the time of opening the account.
  • If you are married, then your spouse will be the default Nominee.
  • If you are not married, then you can nominate any other person. But, you should provide your spouse details once you get married.
  • The scheme recommends to provide Aadhaar Card details of the spouse and nominees.

FAQ About about Atal Pension Scheme

How to Transfer Atal Pension Scheme Account ?

If you are moving from one place to another place, there is no need to transfer APS account as the contributions will be debited through auto-debit facility without any problems.

How to check Atal Pension Scheme Account Status

You can check the status of your APS account in the following ways.
SMS through Mobile
Account Statements
Important things like account activation, contribution deposits, balance in the account will be sent to your mobile as SMS alerts.
You will receive a physical account statement every year.

Who Regulates Atal Pension Scheme (APS)?

APS is regulated by PFRDA (Pension Fund Regulatory and Development Authority) through NPS (National Pension System) architecture.

I am a member of EPF / NPS / PPF. Can I join APS?

Yes. You can join APS.
APS is independent of other retirement and provident fund schemes. So, you can join APS even if you are a member of other retirement schemes like EPF, NPS, PPF, etc.

How many Atal Pension Scheme accounts can I open?

At any time, you can open only ONE account and it is unique throughout your life.

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PM Shram Yogi Maan-Dhan

What is PM Shram Yogi Maan-Dhan (PM SYM) ? | 1 Best guaranteed Pension Plan

by with No Comment Retirement

Table of Contents

Blog Introduction

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on PM Shram Yogi Maan-Dhan Scheme.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on  PM Shram Yogi Maan-Dhan Scheme. This will be a complete guide on PM Shram Yogi Maan-Dhan Scheme. Please read till end of the blog post to know the complete information about this PM Shram Yogi Maan-Dhan Scheme. Lets get started.

What Is PM Shram Yogi Maan-Dhan ?

PM-SYM stands for Prime Minister Shram Yogi Maan-dhan. It is a guaranteed pension scheme for workers of un-organised sectors. It was established by the Government of India to provide guaranteed monthly pension to the workers of un-organised sectors after the age of 60 years.

History Of PM Shram Yogi Maan-Dhan

  • This scheme was announced by the Government of India during the Interim Budget of 2019.
  • The main objective of this scheme is to provide guaranteed monthly pension to the workers of un-organised sectors after the age of 60 years.
  • This scheme was launched on 15-Feb-2019.

How Does This Scheme Work?

  • Open PM-SYM account in a Community Service Centre (CSC).
  • Based on your age, monthly contribution amount will be decided.
  • Pay the contribution amount every month till you reach 60 years of age. The Government will also contribute the same amount every month into your account.
  • After 60 years of your age, you will receive the guaranteed monthly pension of Rs. 3,000 till the end of your life.
  • After that, your spouse will receive the guaranteed family pension of Rs. 1,500 every month till the end of her/his life.
  • After that, the family pension will be stopped. Any remaining amount in the PM-SYM account will be given back to the Government. Your children or legal heirs won’t get any amount.

Features of PM Shram Yogi Maan-Dhan

  • Established by the Government of India.
  • Safe investment option.
  • Pension scheme for all the workers of un-organised sectors.
  • Guaranteed monthly pension to you and your spouse.
  • The Government will also make equal and matching contributions into your account.
  • You will receive a guaranteed monthly pension of Rs. 3,000 after the age of 60 years.
  • If you die after 60 years of your age, then your spouse will receive family pension Rs. 1,500 every month.

Who Can Open The PM Shram Yogi Maan-Dhan Account?

To be eligible for this scheme, you should meet all the conditions listed below.

  • Your age should be between 18 and 40 years.
  • Your monthly income should be Rs. 15,000 or less.
  • You should not be an Income tax payer.
  • You should not be covered under NPS (National Pension System), ESIC (Employees’ State Insurance Corporation scheme) or EPFO (Employees’ Provident Fund Organisation).
  • You need to be a worker from unorganised sector such as home based workers, street vendors, mid-day meal workers, head loaders, brick kiln workers, cobblers, rag pickers, domestic workers, washer men, rickshaw pullers, landless labourers, own account workers, agricultural workers, construction workers, beedi workers, handloom workers, leather workers, audio visual workers or similar other occupations.

How Much You Need To Pay?

  • The amount you need to contribute every month will depend upon your age at the time of joining the scheme.
  • You need to contribute from the day of joining till you reach 60 years of age.
Your AgeYour Monthly Contribution in Rs.
1855
1958
2061
2164
2268
2372
2476
2580
2685
2790
2895
29100
30105
31110
32120
33130
34140
35150
36160
37170
38180
39190
40200
Payment

How To Pay?

When you join the scheme, you need to pay your first month contribution by cash.

After that, you can contribute to the scheme through auto-debit facility from your Savings Bank (SB) account or Jan-Dhan account.

Government Contributions

In this scheme, the Central Government makes equal and matching contributions into your PM-SYM account.

For example, if your age specific contribution amount is Rs. 100 per month, then the Government will also contribute Rs. 100 per month. So, the total contribution for a month will be Rs. 200.If your age specific contribution amount is Rs. 200 per month, then the Government will also contribute Rs. 200 per month. So, the total contribution for a month will be Rs. 400.

How & Where To Join The Scheme?

You need to visit your nearest Community Service Centre (CSC) to join the scheme.

In addition to your eligibility, you need to have

  • Aadhaar card number
  • Savings Bank (SB) account or Jan-Dhan Account
  • mobile phone

In future, the Government is planning to provide PM-SYM web portal or mobile app and you can register yourself using Aadhaar number or SB account number or Jan-Dhan account.

Retirement Age

The retirement age for this scheme is 60 years. It means that after your 60 years of age, you will receive regular monthly pension.

How Much Pension Will You Get from PM Shram Yogi Maan-Dhan scheme?

You will receive a guaranteed monthly pension of Rs. 3,000 after the age of 60 years. You will receive pension every month till the end of your life.

Family Pension: If you die after 60 years of your age, then your spouse will receive 50% of the pension amount (that is Rs. 1,500) as family pension. Note that only your spouse can receive family pension.

After your spouse’s death, the family pension will be stopped. Any amount in your PM-SYM account will be given back to the Government.

Pre-Mature Closure of PM Shram Yogi Maan-Dhan account.

The pre-mature closure rules of this scheme are flexible considering the nature of the jobs of unorganised sector workers.

Leave before 10 years:

If you leave the scheme within 10 years of joining, then you’ll get your total contribution amount plus the interest earned with SB (Savings Bank) account interest rate. Note that you won’t get Government’s contribution amount and it’s interest.

Leave after 10 years: If you leave the scheme after 10 years of joining but before 60 years of your age, then you’ll get your total contribution amount plus the total accumulated interest in the fund or the interest amount earned with SB (Savings Bank) account interest rate, whichever is higher.

Note that you won’t get Government’s contribution amount.

What If You Die Or Disabled Before 60 Years Of Age?

Death before 60 years: After joining this scheme, if you die due to any reason before 60 years of your age, then your spouse can either continue the scheme by paying monthly contributions or leave the scheme.

If your spouse decides to leave the scheme, then your spouse will get your total contribution amount plus the total accumulated interest in the fund or the interest amount earned with SB (Savings Bank) account interest rate, whichever is higher.

Note that your spouse won’t get Government’s contribution amount.

Disability before 60 years: After joining this scheme, if you become permanently disabled due to any reason before 60 years of your age, then your spouse can either continue the PM Shram Yogi Maan-Dhan scheme by paying regular monthly contributions or leave the scheme.

If your spouse decides to leave the scheme, then your spouse will get your total contribution amount plus it’s interest in the fund or the interest amount earned with SB (Savings Bank) account interest rate, whichever is higher.

Note that your spouse won’t get Government’s contribution amount and it’s interest.

In-Active PM Shram Yogi Maan-Dhan Accounts

If you don’t pay your contributions regularly or discontinued your contributions, then  your account will become in-active.

You have the option of activating the account and continuing it further. But, you have to pay penalty charges.

To activate the account, you have to pay all the outstanding due amount along with penalty amount.

The penalty amount will be decided by the Government.

Nomination facility in PM Shram Yogi Maan-Dhan scheme

  • Nomination facility is available.
  • You need to nominate your spouse so that he/she can receive family pension after your death. Note that only your spouse is eligible for family pension.
  • You can’t nominate other people.

Help Centres for PM Shram Yogi Maan-Dhan scheme

If you want to get any help or details about this scheme, then you can approach the following facility centres.

  • Any LIC branch office
  • ESIC or EPFO office
  • All Labour offices of Central and State Governments.

FAQ About PM Shram Yogi Maan-Dhan

Who Manages PM Shram Yogi Maan-Dhan Funds?

This scheme is implemented through LIC (Life Insurance Corporation of India) and CSC (Community Service Centres).
LIC is the Fund Manager and responsible for paying monthly pension. The amount collected under this scheme will be invested as per the investment guidelines specified by the Government of India.

Can NRI Open this PM Shram Yogi Maan-Dhan account?

NRI (Non Resident Indians) can’t join this scheme. This scheme is mainly aimed at workers of unorganised sectors in India. So, NRIs won’t come into picture in this scheme.

Is there any Income Tax Benefits of PM Shram Yogi Maan-Dhan scheme

No income tax benefits. This scheme is mainly for those who are not income tax payers. So, income tax benefits won’t come into picture in this scheme.

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PM Vaya Vandhana Scheme

What Is PMVVS? | PM Vaya Vandhana Scheme | 1 Best Guaranteed returns for senior Citizens of India

by with No Comment Retirement

Table of Contents

Blog Introduction

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on PM Vaya Vandhana Scheme.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on  PM Vaya Vandhana Scheme. This will be a complete guide on PM Vaya Vandhana Scheme. Please read till end of the blog post to know the complete information about this PM Vaya Vandhana Scheme. Lets get started.

What is PM Vaya Vandhana Scheme?

It is a guaranteed pension scheme exclusively for senior citizens. This scheme provides immediate pension. It means that if you deposit the money today, you will receive pension from next month onwards.

History Of PM Vaya Vandhana Scheme (PMVVS)

This scheme was launched on 04-May-2017 with the aim of providing long term, guaranteed and immediate pension to senior citizens. When the scheme was launched in May-2017, senior citizens were offered a time period of 1 year (till May-2018) to deposit in this scheme. But, in Budget 2018, it was announced that senior citizens can deposit in this scheme till 31-March-2020. In May-2020, the Government has announced that senior citizens can deposit in this scheme till 31-March-2023. So, you can deposit in this scheme anytime between 04-May-2017 and 31-March-2023. This scheme is operated by LIC of India.

How Does PM Vaya Vandhana Scheme Work?

  • Deposit a lump sum amount and open an account.
  • Choose your desired pension frequency (monthly, quarterly, half-yearly or yearly).
  • You will receive pension on a regular basis for 10 years as per your chosen pension frequency.
  • At the end of 10 years, you will get your deposit amount back if you are alive.
  • If the account holder die during the term of 10 years, then the pension will be stopped immediately. account holder’s deposit amount will be given to your nominees or legal heirs

Features of PM Vaya Vandhana Scheme (PMVVS)

  • Scheme offered by the Government of India.
  • Scheme exclusively for senior citizens.
  • Safe investment option.
  • Guaranteed pension.
  • Various pension frequencies to choose as per your choice.
  • Peace of mind during retirement life.
  • No GST is charged.

Income Tax Benefits of PM Vaya Vandhana Scheme (PMVVS)

  • No Income tax benefits.
  • The deposit amount is not eligible for deduction under Section 80C of Income Tax Act.
  • The pension amount you receive in this scheme is taxable. You need to declare the pension amount under “Income from other sources” during tax returns and it will be taxed as per your income tax slabs.
  • There is no tax on the deposit amount when it is paid back to you at the end of the term or when it is paid to account holder’s nominees or legal heirs in case of account holder death.
  • TDS (Tax Deducted at Source) is not deducted in this scheme.

Who Can Open The PM Vaya Vandhana Scheme Account?

  • This scheme is exclusively for senior citizens. So, you should be at least 60 years of age to deposit in this scheme.
  • There is no upper limit on the age to enter in this scheme.

How to Open The Account?

  • This scheme is operated by LIC (Life Insurance Corporation) of India.
  • You can deposit in this scheme through online.
  • Through offline at LIC offices or through LIC agents

Last Date For Deposit in PM Vaya Vandhana Scheme

  • This scheme is a limited time offer scheme.
  • The last date to deposit in this scheme will be 31-March-2023.
  • Earlier, the last date to deposit in this scheme was 31-March-2020. But, in May-2020, the Government has extended the scheme for 3 more years and hence the last date to deposit in this scheme will be 31-March-2023.
  • So, you can deposit in this scheme anytime between 04-May-2017 and 31-March-2023.

Term

This scheme is for the period of 10 years.

Pension Frequency of PM Vaya Vandhana Scheme

In this scheme, you can choose to receive pension in one of the following modes.

  • Monthly
  • Quarterly
  • Half-yearly
  • Yearly

 The pension amount will be paid to you at the end of the chosen pension frequency. The following table describes when you will receive pension.

Pension FrequencyWhen will you get Pension?
 Monthly At the end of every month
 QuarterlyAt the end of every 3 months
Half-yearly At the end of every 6 months
 Yearly At the end of every year
Pension Frequency

Deposit Limit of PM Vaya Vandhana Scheme

The deposit amount varies based on your chosen pension frequency.

The following table lists the minimum and maximum deposit amount for various pension frequencies. 

Pension FrequencyMinimum Deposit Amount (Rs.)Maximum Deposit Amount (Rs.)
Monthly
1,62,162
15 Lakhs
Quarterly
1,61,074
14,89,933
Half-yearly1,59,57414,76,064
Yearly1,56,658
14,49,086
Deposit Limit

Note: Please note that the maximum deposit amount is per senior citizen. It means that you can have one or more accounts under this scheme. The total deposit amount of all the accounts should not exceed the maximum deposit amount for the chosen pension frequency.

For example, let us assume that you have 3 accounts under this scheme and you have chosen to receive quarterly pension. In this case, the total deposit amount of all the 3 accounts should not be more than Rs. 14,89,933.

In addition, if your spouse is also a senior citizen, then he or she can also invest a maximum of Rs. 15 Lakhs. So, you and your spouse can together invest a maximum of Rs. 30 Lakhs.

How Much Pension Can I Get from PM Vaya Vandhana Scheme ?

The pension amount varies based on the deposit amount and the chosen pension frequency.

The following table lists minimum and maximum pension amount for various pension frequencies.

Pension FrequencyMinimum Pension (Rs.)Maximum Pension (Rs.)
Monthly1,0009,250
Quarterly3,00027,750
Half-yearly6,00055,500
Yearly12,0001,11,000
Minimum and Maximum Pension

Interest Rates (%)

The interest rates offered in this scheme for various pension frequencies are given below. 

Pension FrequencyAnnual Interest Rate (%)
 Monthly 7.40%
 Quarterly7.45%
 Half-yearly 7.52%
 Yearly7.66%
Interest Rates

The interest rate (on the day of account opening) will remain the same throughout the tenure of 10 years. It will not change even if there are changes to the interest rate thereafter.

From May-2017 to 31-March-2020, the interest rate was 8% for the monthly pension frequency. But, in May-2020, the Government has announced some important changes to the interest rate of this scheme.

As per the announcement,

  • The interest rate will be revised every financial year .
  • The interest rate for the financial year 2020-21 will be 7.4% for the monthly pension.
  • The revised interest rate will be in line with the interest rate of Senior Citizens Savings Scheme (SCSS) upto a limit of 7.75%.

Pre-Mature Closure

Pre-mature closure option is allowed in this scheme.

You can leave this scheme in the middle of 10 years only in case of exceptional situations like you are in need of money for the treatment of critical diseases of yourself or your spouse.

But, there is a penalty for leaving the scheme before completing the term. The penalty amount is 2% of the deposit amount. If you leave pre-maturely, then 2% of the deposit amount will be deducted and you will get only 98% of the deposit amount back.

For example, if you deposit Rs. 10 Lakhs and you decide the leave the scheme after 3 years, then Rs. 20,000 will be deducted as penalty and you will get only Rs. 9.8 Lakhs back.

In case of Death of the account holder

  • If the account holder die during the term of 10 years, then the pension will be stopped immediately and the entire deposit amount will be given back to depositor’s nominees or legal heirs.
  • There is no exclusion in case of suicide of the depositor. So, even if if the commit suicide, the entire deposit amount will still be given to depositor’s nominees or legal heirs.

Loan Facility

  • Loan facility is available in this scheme after completion of 3 years.
  • The maximum loan amount that you can get is 75% of the deposit amount.
  • The interest rate (%) for the loan amount will be decided from time to time. For example, for the loans granted till 30-April-2018, the annual interest rate is 10% payable half-yearly.
  • The loan interest will be recovered from the pension amount. The outstanding loan amount will be recovered from the deposit amount at the time of leaving the scheme.

Free Look Period

  • After depositing in this scheme, if you are not happy with it, you can return the policy and get your entire deposit amount back. This is called free look period.
  • Free look period is 15 days from the date of receipt of the policy. If you deposited online, then the free look period is 30 days.

Nomination

Nomination facility is available in this scheme.

FAQ about PM Vaya Vandhana Scheme

Is The Pension Guaranteed from PM Vaya Vandhana Scheme

Yes. The pension amount is guaranteed for the entire term of 10 years.

Maturity Benefit of PM Vaya Vandhana Scheme

If you survive till the end of 10 years, then the deposit amount will be given back to you. You won’t get bonus in this scheme.

Is there any Extension period of PM Vaya Vandhana Scheme

Extension feature is not allowed in this scheme. It means that you can’t extend this scheme after the term of 10 years. You will need to close the account and get the deposit amount back.
If you want to deposit further, then you will need to open a new account with the new rules applicable at that point in time.

Is there any GST applicable for PM Vaya Vandhana Scheme

GST (Goods and Services Tax) is not charged in this scheme.

I am a NRI , can I Invest in PM Vaya Vandhana Scheme ?

No. NRI (Non Resident Indians) can’t invest in this scheme.

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Gratuity scheme

What Is Gratuity? | Gratuity Scheme | 1 Best loyalty reward scheme for employees

by with No Comment Retirement

Table of Contents

Blog Introduction

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on Gratuity Scheme.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on  Gratuity Scheme. This will be a complete guide on Gratuity Scheme. Please read till end of the blog post to know the complete information about this Gratuity Scheme. Lets get started.

What Is Employee Gratuity Scheme?

Gratuity is a retirement and loyalty reward scheme for the salaried employees. Gratuity is a defined benefits scheme in which a lump sum amount will be paid to the employee by the employer, when he leaves the organisation after serving for certain number of years. It is more like a reward from the employer appreciating the employee’s service. Gratuity scheme is a part of employee’s salary and it is paid by the employer for the services offered by the employee.

History Of Employee Gratuity Scheme

Before 1972, it was not compulsory for an employer to provide some reward to an employee when he leaves the organisation. But, in 1972, Government of India came up with Payment of Gratuity Act. As per this Act, if the employer is having more than 10 employees, then Gratuity scheme is a compulsory benefit. Employer should pay Gratuity when the employee leaves the organisation after serving certain number of years.

How Does Employee Gratuity Scheme Work?

When an employee joins an organisation, he automatically becomes a part of employer’s Gratuity scheme. Employer specifies the gratuity scheme benefits on the Offer Letter given to the employee. Employer contributes to the Gratuity fund on his own or through a life insurance company. When the employee leaves the organisation after serving for at least 5 years, employer pays the gratuity amount as a one time lump sum amount appreciating employee’s service. If the employee leaves before 5 years, then employee will not get any gratuity benefits.

Features Of Gratuity Scheme

  • It is a retirement or resignation benefit scheme.
  • No contribution from the employee. The Employer pays the entire contribution.
  • Income tax benefits.

Eligibility Criteria for Employee Gratuity Scheme

  • An employee is eligible to receive gratuity benefits if he serves the organisation for at least 5 years of continuous service as an employee.
  • If an employee leaves the organisation before 5 years, then no gratuity will be paid.
  • In case of death or disablement of the employee before 5 years, the eligibility rules are not applicable.
  • In case of death, employee’s nominees will get the gratuity benefits.

When Will Employee Get Gratuity?

Gratuity is a one time lump sum payment and it is paid to the employee when he leaves the organisation after serving for at least 5 years of continuous service as an employee.

The reason for leaving the organisation can be one of the following.

  • Resignation.
  • Laid off by employer.
  • Voluntary retirement.
  • Retirement.
  • Disability due to accident or disease.
  • Death

How To Calculate Gratuity?

Gratuity benefit amount is calculated based on the following two things.

  • Employees covered under Gratuity Act.
  • Employees NOT covered under Gratuity Act.

Let us see the calculation details for each category.

Employees covered under Gratuity Act: For the employees covered under Gratuity Act, it is calculated using the following formula.

Gratuity = (number of years of service x last drawn monthly salary x 15) / 26.

where “number of years of service” is the total number of years of service of employee to the employer . if the employee’s service is more than 6 months, then it will be considered as 1 year. if the employee’s service is less than or equal to 6 months, then it will be ignored.

For example, if employee’s service is 8 years and 7 months, then it will be considered as 9 years. If employee’s service is 8 years and 5 months, then it will be considered as 8 years only.

Last drawn monthly salary is the amount employee received just before leaving the organisation.

Monthly salary includes Basic Pay and DA (Dearness Allowance) only.

Employees NOT covered under Gratuity Act: For the employees who are NOT covered under Gratuity Act, it is calculated using the following formula.

Gratuity = (number of completed years of service x average monthly salary x 15) / 30.

where “number of completed years of service” is the total number of completed years of service of employee to the employer. only the completed number of years will be considered. Any Service in months will be ignored.

for example, if the employee’s service is 8 years and 10 months, then only 8 years will be considered.

Average monthly salary is the average of last 10 months’ salary just before leaving the organisation.

monthly salary includes Basic Pay, DA (Dearness Allowance) and commissions, if any, only.

Limit On Gratuity Scheme Benefits

There is an upper limit on the Gratuity scheme benefit amount payable to the employees. The limit details are given below.

Employee TypeGratuity Limit
 Government employee Rs. 20 Lakhs from 01-Jan-2016.
 Before that, the limit was Rs. 10 Lakhs
 Non-Government employee Rs. 20 Lakhs from 29-Mar-2018.
 Before that, the limit was Rs. 10 Lakhs
Limit On Gratuity Benefits

Government Employees:

  • The limit is Rs. 20 Lakhs only. Earlier, the limit was Rs. 10 Lakhs. It was increased to Rs. 20 Lakhs with effective from 01-Jan-2016.
  • Based on the calculations formulas mentioned in the previous section, if the Gratuity benefit is more than Rs. 20 Lakhs, the employer can pay a maximum of Rs. 20 Lakhs only as per the law.
  • However, the employer can choose to pay the amount in excess of Rs. 20 Lakhs in the form of Bonus or other salary components.

Non-Government Employees:

  • The limit is Rs. 20 Lakhs only. Earlier, the limit was Rs. 10 Lakhs. It was increased to Rs. 20 Lakhs with effective from 29-March-2018.
  • Based on the calculations formulas mentioned in the previous section, if the Gratuity benefit is more than Rs. 20 Lakhs, the employer can pay a maximum of Rs. 20 Lakhs only as per the law.
  • However, the employer can choose to pay the amount in excess of Rs. 20 Lakhs in the form of Bonus or other salary components.

Income Tax Benefits in Gratuity Scheme

The income tax impact on Gratuity amount is based on whether the employee is Government or non-Government. The details of each category are given below.

Government Employees: The gratuity amount received is completely (100%) tax free for Government employees.

Non-Government Employees: Tax treatment for non-Government employees can be divided into the following 2 categories.

  1. Non-Government employees covered under Gratuity Act. :
  2. Non-Government employees NOT covered under Gratuity Act.

Non-Government employees covered under Gratuity Act: For the non-Government employees covered under the Payment of Gratuity Act, the Gratuity amount received will be tax free to a certain limit. That limit will be the lowest of the following 3 items.

1. actual gratuity received.
2. (number of years of service x last drawn monthly salary x 15) / 26.
3. Rs. 20 Lakhs
Gratuity Act

Any amount received more than the above mentioned limit will be added under the head “Income from Salary” and it will be taxed as per employee’s income tax slab.

 Non-Government employees NOT covered under Gratuity Act: For the non-Government employees NOT covered under the Payment of Gratuity Act, the Gratuity amount received will be tax free to a certain limit.

That limit will be the lowest of the following 3 items.

1. actual gratuity received.
2. (number of years of service x last drawn monthly salary x 15) / 30.
3. Rs. 20 Lakhs
Gratuity Act

Any amount received more than the above mentioned limit will be added under the head “Income from Salary” and it will be taxed as per employee’s income tax slab.

Death Of An Employee

  • In case of death of the employee, the eligible gratuity amount will be paid to his nominees or legal heirs.
  • In case of death of the employee, the eligibility criteria of 5 years of continuous service will not be applicable.
  • Even if the employee’s service is less than 5 years, the gratuity amount will be paid to his nominees.

Nomination facility for Gratuity Scheme

  1. Nomination facility is available in Gratuity scheme.
  2. After 1 year of service, an employee can make a nomination with his employer to pay the Gratuity benefits just in case of his death before retirement.
  3. Nomination can be made in the name of one or more family members.
  4. Nominees should be family members only. Employee can’t nominate any one outside of family.
  5. Employee can update nomination during the employment as and when family situation changes.

FAQ About Employee Gratuity Scheme

Can Employer Deny Paying Gratuity?

There are certain situations where the employer will not pay gratuity to employee even if the employee is eligible for gratuity. The Employer can choose NOT to pay gratuity to an employee if he is laid off for reasons such as misconduct, violence, moral offence, causing damage to employer’s properties, etc.

Maternity Leave For Gratuity Calculation

For female employees, the maternity leave has been increased to 26 weeks from 12 weeks. This is for the calculation of continuous service in Gratuity. This has been effective since 29-Mar-2018.

What Is Gratuity?

Gratuity is a retirement and loyalty reward scheme for the salaried employees. Gratuity is a defined benefits scheme in which a lump sum amount will be paid to the employee, by the employer, when he leaves the organisation after serving for certain number of years. It is more like a reward from the employer appreciating the employee’s service.

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Senior citizens savings scheme

What is Senior Citizens Savings Scheme | Best Senior Citizen Investment scheme | 1 Best Guaranteed Returns

by with No Comment Retirement

Hello Friends, Welcome to my Blog Investinfy.com the best financial blogs where you will be able to read about the end to end information on many investment schemes and financial topics. In this Blog post we will be focusing on Senior Citizens Savings Scheme.

Generally when we want to invest money on any investment scheme , we always asks our friends and relatives that where we can invest ? and they suggests the investment schemes which they like most. Then we invest as per their suggestions, that is good as we consider them as our well wisher , But here I want to mention one thing, if we know end to end information of each investment schemes at least it will help us to understand if that investment scheme is good for us or not.

Hence it is better to have a complete idea about each investment scheme where we invest. Therefor this blog will help you to know end to end information of many Indian investment schemes available right Infront of you.

In this blog post I will be explaining my analysis on Senior Citizens Savings Scheme. This will be a complete guide on Senior Citizens Savings Scheme. Please read till end of the blog post to know the complete information about this Senior Citizens Savings Scheme. Lets get started.

Table of Contents

What is Senior Citizens Savings Scheme (SCSS)?

This scheme is exclusively for Senior Citizens (aged 60 years or more). This scheme provides regular income on a quarterly basis. If you are a retired person and having some lumpsum amount with you then this is the best and risk free saving scheme for you to earn a regular quarterly income for yourself.

How does Senior Citizens Savings Schemes works ?

  • You need to deposit a lump sum amount into your SCSS account.
  • Every Quarter means every 3 months you will start receiving the interest till the end of your tenure.
  • You will get back your deposited amount back at the end of your tenure.

Features of Senior Citizens Saving Scheme ?

  • This Scheme is exclusively for Senior Citizens of India only.
  • This scheme is Backed by the Government of India.
  • This scheme provides Guaranteed returns.
  • This scheme is a Safe investment option for eery senior citizens.
  • This scheme gives you a regular quarterly income.
  • You will have a peace of mind during your retirement life.
  • You will be also getting lots of income tax benefits.

Where do you open the SCSS account ?

Senior Citizen saving scheme account can be opened in

  • Post Office
  • Nationalized banks
  • Also in private sectors bank

Who can open the SCSS account ?

  • Only Indian residents can open the account. An individual of the age of 60 years or more can open the account.
  • An individual of the age of 55 years or more but less than 60 years and who has retired on superannuation or under VRS can also open account.
  • The retired personnel of Defence Services (excluding civilian Defence employees) of the age of 50 years or more can open the account.
  • Joint account can be opened with spouse only. First depositor in joint account is the investor.
  • A depositor can open more than one account either individually or jointly with spouse.
  • Any number of accounts can be opened. But, total investment in all the accounts should not exceed the maximum investment limit of Rs. 15 Lakhs.

What is the deposit limits of senior citizens savings scheme account?

  • Minimum deposit amount is Rs. 1,000.
  • Deposit amount should be in multiples of Rs. 1,000.
  • Maximum deposit limit is Rs. 15 Lakhs.

What is the maturity period of senior citizens savings scheme?

  • Maturity Period for this scheme is 5 Years.

Extension Period of SCSS

  • After maturity, the account can be extended for further 3 years.
  • Account can be extended within one year of maturity by giving application.
  • During the extension period, account can be closed at any time after one year of extension without any deduction.

What is the interest rate for senior citizens savings scheme ?

  • Current annual interest rate is 7.40%.
  • Interest amount is paid on a quarterly basis. That means interest is paid at the end of Calendar quarter (31st March, 30th June, 30th Sept and 31st December).
  • Interest rate (on the day of account opening) will remain the same throughout the tenure of SCSS. It will not change even if there are changes to the interest rate thereafter.

How will you receive the interest ?

You can receive quarterly interest in one of the following ways.

  • Quarterly interest can be credited into Savings Bank (SB) Account present in the same deposit office.
  • Quarterly interest of SCSS accounts present at CBS (Core Banking Solution) Post Offices can be credited in any Savings Bank (SB) Account present at any other CBS Post Offices.
  • Money order

Process for Premature Closure of SCSS account

  • If you close the account pre-maturely after 1 year, then 1.5% of the deposit amount will be deducted and you will receive the remaining amount.
  • If you close the account pre-maturely after 2 years, then 1% of the deposit amount will be deducted and you will receive the remaining amount.

Nomination Facility of Senior Citizens Savings scheme account

  • You can nominate either at the time of account opening or after opening the account but before maturity.

Income Tax Benefits of SCSS account

  • Investment made in SCSS are also eligible for tax deductions in the following manner.
  • The principal amount deposited in SCSS is eligible for a tax deduction of up to Rs. 1.5 Lakh per annum under section 80C of the Income Tax Act, 1961.
  • Interest on SCSS is taxable as per the tax slab applicable to the person. In case the interest amount earned is more than Rs. 50,000 for a fiscal year, Tax Deducted at Source (TDS) is applicable to the interest earned. This limit for TDS deduction on SCSS investments is applicable from AY 2020-21 onwards.
  • ICICI Bank
  • Bank of Baroda
  • State Bank of India
  • Canara Bank
  • Punjab National Bank
  • Union Bank of India
  • Vijaya Bank
  • UCO Bank
  • Bank of India
  • IDBI Bank

Interest Earnings Projection Table

Deposited AmountInterest Rates(%)Deposited Period in Years Quarterly interest pay out (INR)
5,00,0007.40%59,250
6,00,0007.40%511,100
7,00,0007.40%512,950
8,00,0007.40%514,800
9,00,0007.40%516,650
10,00,0007.40%518,500
11,00,0007.40%520,350
12,00,0007.40%522,200
13,00,0007.40%524,050
14,00,0007.40%525,900
15,00,0007.40%527,750
Interest Earnings Projection Table

FAQ About Senior Citizens Savings Scheme

What is the Compounding Frequency of Senior citizen saving scheme?

Compound interest is not applicable in this scheme. Simple interest calculation is followed in this scheme.

Is there any Account Transfer faciality available in Senior citizen saving scheme?

SCSS account can be transferred from one deposit office to another deposit office.

What is the eligibility criteria of joint senior citizen saving account?

The age of first depositor is supposed to be above 60 years. However, there is no age limit for the second applicant. The joint account can be opened only with the spouse. However, the entire amount in a joint account will be attributable only to the first account holder.

What is the maximum age of senior citizen saving account opening?

Any individual, above the age of 60, can open a Senior citizen savings account.

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  1. TDR complete end to end information
  2. STDR complete end to end information

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