Main Features of NPP 2000

The New Pension Scheme (NPS) or National Pension System, also known as NPP 2000, is a voluntary, defined contribution retirement savings scheme launched by the Government of India in 2004. It aims to provide retirement income to all citizens, including those in the unorganized sector. Here are the main features of NPP 2000:

1. Defined Contribution:
NPP 2000 is a defined contribution pension scheme where the individual contributes a certain percentage of their salary to the pension account. The contributions are invested in various asset classes such as government securities, corporate bonds, and equities.

2. Flexible Contribution:
One of the key features of NPP 2000 is the flexibility it offers in terms of contribution amounts. Individuals can choose the contribution amount and frequency as per their financial capabilities. The minimum contribution required to open an NPS account is Rs. 500 and a minimum contribution of Rs. 1,000 per year is mandatory to keep the account active.

3. Tiered Structure:
NPP 2000 has a tiered structure consisting of two accounts - Tier I and Tier II. Tier I is the primary retirement account that is non-withdrawable until the individual reaches the age of 60. Tier II is a voluntary savings account that allows individuals to withdraw their savings whenever they desire.

4. Investment Options:
NPP 2000 offers individuals the flexibility to choose their investment options based on their risk appetite. The scheme provides three investment choices: Active Choice, Auto Choice, and Conservative Choice. Active Choice allows individuals to allocate their funds across different asset classes, while Auto Choice automatically adjusts the investment mix based on the individual's age.

5. Portability:
Another significant feature of NPP 2000 is portability. Individuals can contribute to their NPS account from anywhere in India, regardless of their employment or residential status. This portability allows for seamless account management and contributions even if the individual changes jobs or locations.

6. Tax Benefits:
NPP 2000 offers attractive tax benefits to encourage participation. Contributions made towards NPS are eligible for tax deductions under Section 80CCD(1) of the Income Tax Act, up to a maximum of 10% of the individual's salary or gross income. Additionally, an exclusive tax deduction of up to Rs. 50,000 is available under Section 80CCD(1B).

7. Annuity Options:
Upon retirement, individuals can utilize the accumulated corpus in their Tier I account to purchase an annuity from an empaneled insurance provider. The annuity provides a regular income stream during retirement, ensuring financial stability.

In conclusion, NPP 2000 is a comprehensive pension scheme with key features like defined contributions, flexible contribution options, tiered structure, investment choices, portability, tax benefits, and annuity options. It aims to provide a secure retirement income for individuals across various employment sectors in India.