Self Employed Pension - Eligibility Criteria and Benefits

In India, a significant portion of the workforce is self-employed. If you are a self-employed individual, you would know that it has many advantages, like you don’t have to be constantly under the pressure of deadlines, following office protocols, or face the wrath of your boss. Instead, you can choose your own working hours, be your own boss and determine your work terms.However, being self-employed also has its cons. And one of the important downsides is that you don’t have anyone to set up or contribute to your pension fund. This means when you stop working or retire, you would have to rely solely on your savings to take care of your expenses during old age.To address this issue, the government of India started the National Pension Scheme for Traders and Self-Employed Persons in 2019. Like the regular NPS for the employed individual, it is a voluntary contribution pension scheme, wherein you must contribute a small amount to your NPS account every month to build a corpus for the future. The scheme guarantees to offer a minimum monthly mention of Rs. 3000 to all subscribers after they reach 60 years.The scheme is meant for the benefit of retail traders, shopkeepers, and self-employed persons whose annual income is not more than Rs. 1.5 crore. The scheme offers these traders and shopkeepers social security and protects their old age.So, if you are self-employed and run your own shop or a small business, you can take advantage of this scheme and get pension during old age through this scheme. However, to participate in the scheme, you must meet the following requirements.

• You must be aged between 18 and 40 years at the time of enrolling for the scheme.
• You must be involved in a particular profession such as small trader, shopkeeper, commission agent, broker, or self-employed person.
• Your annual income must not be more than 1.5 crore
• If you are engaged in an organised sector or if you have already subscribed for EPF ( Employee Provident Fund ) or NPS (National Pension System).
• You must have an Aadhaar Card
• You must have a savings bank account or Jan Dhan bank account with IFSC code.

• The National Pension Scheme for Traders and Self-Employed Persons provides an assured monthly pension of Rs. 3000 per month to all eligible subscribers after they reach 60 years.
• When you subscribe to the self-employed pension scheme and contribute to your account, the government of India will also make an equal contribution to your account. For example, if you are a 30-year-old individual who wants to contribute Rs. 100 per month to your NPS account, then the central government will make an equal contribution as subsidy to your account. This means your contributions effectively become double.
• If you have been contributing to your NPS for traders and self-employed persons account and before the maturity of the plan, if you become disable due to accident or any other cause before the age of 60, your spouse shall be entitled to continue the scheme by making regular contributions.
• However, if you are not able to make regular contributions, you have the flexibility to exit the scheme and you will be entitled to receive back the contributions made by you until the date of exit along with the interest earned by the pension fund or at savings bank account interest rate, whichever is higher.
• After the scheme’s maturity, when you start receiving the pension, your spouse shall be entitled to get 50% of the pension you get after your demise.

If you are a retail trader, shopkeeper, or a self-employed person, you must visit the local CSC (Common Services Centre) to enrol for NPS. You must carry a copy of your Aadhaar Card and copy of savings bank account statement or Jan-Dhan account statement.You must pay the first subscription in cash, and later you will be provided with the facility to pay the subsequent contributions online through the NPS -Traders website or through the mobile application. You must self-register on the portal using your Aadhaar number or the savings bank account details.

When you enrol for this NPS scheme, the first contribution towards your account must be paid in cash. However, all the other subsequent contributions can be done through the ‘auto-debit’ facility from your savings bank account or Jan Dhan account.The contribution you make towards your NPS account depends on your age. And you must make regular contributions to your NPS account from the date of subscribing to the scheme till you reach 60 years.
If you fail to make your monthly contribution due to shortage or funds or any other reasons, you can regularise your contribution by paying the entire outstanding amount, along with the penalty charges, as decided by the government.

For subscribers’ benefit, the government has kept the NPS Exit Withdrawal provisions simple and flexible.

• If you want to exit the scheme within 10 years of subscription, you can be assured of getting back the contributions you have made to the NPS account till date along with savings bank interest rate applicable thereon.
• If you want to exit or withdraw the funds from your NPS account after 10 years, but before the scheme’s maturity or before you reach 60 years, you will get back your contribution along with the interest as earned by the pension fund or at the savings bank account interest rate, whichever is higher.
• If you have made your contributions regularly but become permanently disabled before the age of 60, your spouse can continue the scheme by making regular contributions. Alternatively, you can exit the scheme and withdraw all the accumulated funds; you can be assured of getting back your contributions along with the interest earned by the fund.
• In the event of your demise, your spouse is entitled to receive 50% of the pension. However, after your spouse passes away, the NPS account will automatically terminate, and the entire corpus will be credited to the fund.

As a self-employed individual, you would want to ensure that you get a regular income stream during your old age, and NPS for Traders and Self-employed is a cost-effective investment to ensure that your future is secured. You can be assured of a minimum pension amount that you can use for your regular expenses.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.