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User guide to opening an NPS account: A few points to consider

Tax Benefits of NPS: How you can reap them? A must read.

How can NPS Benefits help you in your golden years? Explained

NPS – Budget Impacts on State Government Employees

February 16, 2022

The term “pension” is almost synonymous with retirement, and we think about retirement as a time of leisure when we can do whatever we like. While this concept is true, it is also important to have a stable retirement plan that allows you to enjoy this next adventure of your life.

Coming to retirement plans, the National Pension System (NPS) is one that was introduced by the Government of India in 2004. Under this retirement scheme, an individual can make monthly contributions to their NPS accounts, the funds from which are then pooled together to form a larger fund. This fund is then reinvested into the market by fund managers who are vetted by the Pension Fund Regulatory Development Authority (PFRDA). Investments can be made in to government bonds, bills, corporate debentures and shares, which makes the portfolio highly diverse. Apart from the option to choose between different investment forms, you can also choose between fund managers, along with provisions to switch between schemes and fund managers, keeping within certain guidelines.

Being introduced by the government, NPS is among the most trusted retirement plans, and apart from these benefits mentioned above, also provides tax benefits.

What are the tax benefits provided by NPS?

If you are an individual who is subscribed to the National Pension System, you are entitled to claim tax benefits under section 80C of the Income Tax Act, 1961. Under the act, you are entitled to receive tax deductions with a limit of ₹1.5 lac as under Sec 80 CCD.

If you hold a Tier I NPS account, you are eligible for an additional tax benefit of ₹50,000 that is over and above the deductible amount of ₹1.5 lac. If you are a government or a corporate employee, a portion of your salary can be contributed to NPS, which can also be deducted from your taxable income, helping you further lower your taxes. The new budget for the year of 2022-23 is also proposing some changes which can increase these tax deductions and benefit the NPS subscribers even more.

What was proposed in the new budget?

Supratim Bandhyopadhyay, the Chairman of the PFRDA, mentioned that the employees of the State Government, who previously had a tax deduction limit of 10%, would enjoy the benefit of the tax deduction limit being increased up to 14%.

This brings state government employees at par with employees of the central government, enhancing the social security benefits of the state government employees. According to the Financial Minister of the Indian Government, Smt Nirmala Sitharaman, this move is made to provide both the central and state government employees with equal treatment. Apart from bringing in parity between the employees of the government at both levels, this step would also increase the amount saved by the state government employees, giving them the opportunity to make other investments.

How will government employees be affected?

If you are subscribed to the National Pension System, you are eligible to receive a tax deduction benefit under three different sections of the Income Tax Act, 1961. Under section 80CCD(1), you have the eligibility to make deductions of upto ₹1.5lac, which comes under the limit of the same amount under section 80C.

Over and above the deductions of 80C, NPS provides further deductions of upto ₹50,000 which comes under section 80CCD (1b). However, this deduction is only applicable if you are a tier I NPS account holder. This means that you can claim total deductions of ₹2 Lacs under these two sections.

As per the memorandum of the new budget, the increased tax deduction percentage will help increase the corpus that can be accumulated. Having the provision to invest more in the NPS would mean higher returns on retirement, which would give the State Government employees more social security, similar to Central government employees. Not only does this bring about equality in both the levels of the governments, but it also paves the path for individuals to have a more stable future upon their retirement.

Featured Posts

User guide to opening an NPS account: A few points to consider

Tax Benefits of NPS: How you can reap them? A must read.

How can NPS Benefits help you in your golden years? Explained

Is the NPS distribution model at an Inflection Point?

February 15, 2022

With PFRDA’s impetus on revised POP compensation, the demand for National Pension System (NPS) is likely to gain traction in the country with 1.4 million-plus customers as of March 31, 2021, the total pension AUM was Rs. 5,62,338 crore, up 38.18 percent year over year. NPS has a lot of space to develop because of the proposed tax breaks in the budget. Furthermore, given the underutilization of NPS in India and the absence of social security infrastructure, we feel that Pension Funds have a lot of space to grow.

Intending to maximize the reach & to increase the footprint of the National Pension System (NPS), pension regulator PFRDA has notified increased charges for NPS-related services offered by POP w.e.f February 1, 2022. This increase is across initial subscriber registration, initial contribution, all subsequent contribution, and persistency charges. The proposed revision of the POP compensation structure anticipates strengthening the inclusion of distributors in the entire value chain by increasing potential revenue.

Regulator’s policies aiming at expanding the NPS market, such as the inclusion of agents, increase in revenue, and many only indicate better prospects for the market players going ahead. With the increase in POP revenues, key players are keen to onboard distributors to expand their market by offering attractive revenue payout to the agents. Agents / MFDs will act in a fiduciary capacity towards their clients and assist their clients at all stages of NPS, from onboarding to withdrawal. Agents will be required to choose a POP to extend NPS services to their investors and add a revenue stream to their existing cash flows.

Featured Posts

User guide to opening an NPS account: A few points to consider

Tax Benefits of NPS: How you can reap them? A must read.

How can NPS Benefits help you in your golden years? Explained

Make sure you retire with a pension | How to choose the best retirement plan?

February 7, 2022

You have a certain lifestyle that you are accustomed to, and it is reasonably easy to understand that you would want the same lifestyle moving forward, if not a better one. While you work hard to build a stable life for yourself and your loved ones, you also have a responsibility to secure your own future. In order to do so, it is essential to have a proper retirement plan in place.

When planning your retirement, here are answers to some questions you should be asking.

What exactly is a Retirement Plan?
A retirement plan gives you the opportunity to relish your retirement by giving you a regular income, which can help you sustain your finances. While it may seem that retirement is a long way off, it is not. Retirement comes sooner than you think and that is why it is important to figure out what you need from your retirement plan. Moreover, having a retirement plan also ensures that you are prepared for an emergency, however far-fetched that might be.
Planning for retirement now means ensuring that you make systematic savings over time, which, in turn, gives you returns when you need a steady source of income the most. While retirement means that you are void of your usual income from your employer/client, your sustenance costs do not go down. This includes your usual cost of living, medical expenses, and any others associated with your lifestyle.
While every retirement plan is unique with their own attributes, the National Pension System is a retirement plan that supersedes most other retirement plans by a large margin.

Why do you need a retirement plan?
You can be the master of your trade, and can possess a great deal of knowledge, but what we can never be certain of, is what the future holds for us. While we hope that it is certainly bright and the best, it does not hurt to take precautions and ensure safety in case of uncertainties. Saving now, to ensure that you do not have to struggle in the future, is one of the biggest precautions we can take while we’re still gainfully employed.
Moreover, retirement plans like the National Pension System, an initiative by the Government of India, ensures that you save a significant amount of money every year in taxes. You can save as much as ₹62,400 every year over and above the tax redemptions you can get on other investments.
This retirement plan not only ensures that you have an adequate amount of income every month after retirement as a pension, but also saves you money right now with its tax benefits, which make it a prospect that is hard to pass by.

What makes NPS a special retirement plan?
The National Pension System, or the NPS, is a government initiative that was introduced in 2004 and is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), and has appointed KFintech as Central Recordkeeping Agency (CRA).
What makes NPS special is its ability to increase in value over time. The funds invested into the National Pension System are pooled together and then reinvested into the market as government bonds, bills, corporate debentures, and shares, making it a highly diversified portfolio. These funds are invested by portfolio managers who have been vetted by the PFRDA. These investments increase in value over time and accumulate to form a substantial corpus that you can withdraw on retirement as lump sum, and in the form of monthly payouts as pension.
The National Pension System is among the most flexible retirement plans because it gives you the liberty to have the investment schemes and the fund managers of your choice. Depending on the returns you expect from your investment, you can make the necessary choices. Moreover, you can also switch between schemes and fund managers, keeping in accordance with certain regulations.
The National Pension System also provides you with substantial tax benefits. You can save upto ₹1,50,000 under section 80CCD, plus an additional amount of upto ₹50,000 under section 80CCD (1B). This attribute of NPS makes it a retirement plan with dual benefits, of both saving your money as well as ensuring that you have a superior return on your investments.
This scheme is open to all Indian citizens between the ages of 18 and 75. If you are looking for a retirement plan, you check the National Pension System with KFintech here <https://nps.kfintech.com/>

Featured Posts

User guide to opening an NPS account: A few points to consider

Tax Benefits of NPS: How you can reap them? A must read.

How can NPS Benefits help you in your golden years? Explained

NPS – Is it a stable retirement plan?

February 3, 2022

When you think about retirement, you immediately have a picture of leisure and a whole lot of time on your hands. Daydreaming aside, it is important to note that your retirement can be however you want it to be. Retirement is one of the phases of your life that requires intricate early planning and disciplined saving, such that your lifestyle does not get compromised when you retire for good. In order to do that, you should look for a stable and sustainable retirement plan that caters to your long term needs. While there are many retirement plans available that are provided by numerous service providers, it is important to choose the right one, because this concerns your potential future, and the lifestyle that comes along with it. Therefore, there are certain questions that might come to your mind. Let’s examine them one by one!

Why is early planning and saving important?
To ensure that your future is safe and you are equipped with the essentials to continue the lifestyle of your choice, it is integral to save enough while you have a steady source of income. While it may seem that your retirement years are far and you have plenty of time, it is true that time flows swiftly, and before you realise, your retirement will be imminent. Moreover, early planning and early saving is important to develop a disciplined habit that enables you to make the best decisions.
For instance, if you start early, the biggest advantage that you have is time, and the opportunity to segregate your savings, so that you do not face the burden of saving a large amount in a small time. Although it is understandable that expenses are more than savings in the younger years, it is important to realise that smart savings will help you fulfil your long term goals efficiently, and also put your retirement planning into a clearer perspective.

What is NPS?
Among the many retirement plans that are available for subscription from multiple similar service providers, NPS, or the National Pension System is among the most sustainable ones. A retirement savings plan that has been introduced by the Government of India, this is a voluntary scheme that enables you to make smart segregated savings during your work life. The motive behind this plan is to create an opportunity that provides adequate income after retirement to Indian citizens.
In the National Pension System, or the NPS, the investments are pooled together into a pension fund which are then further invested into a diversified portfolio that comprises Government Bonds, Bills, Corporate Debentures, and Shares. These investments are made by professional fund managers who are vetted by the Pension Fund Regulatory and Development Authority (PFRDA), under approved guidelines. These investments grow and form a substantial sum over the years, which can then be withdrawn as lump-sum and monthly dividends as pension on your retirement.
Apart from providing substantial long term returns, there are several other benefits that NPS provides, which makes it one of the most sustainable retirement plans.

Benefits of NPS
Flexibility: One of the most lucrative benefits provided by the National Pension System is the flexibility that it comes with. You have the option to choose from a number of investment options, and the fund managers. You can choose your investment option according to the expected returns and monitor the growth of your portfolio. You also have the option to switch between fund managers and investment options keeping in line with the guidelines.
Tax Benefits: One of the most attractive benefits of the NPS, along with letting you make savings for your retirement, is that it also allows you to make tax redemptions letting you save more money. The National Pension System allows you to make tax redemptions of upto 2 lacs per annum as per 80CCD and 80CCD (1B).
Portability: Once you open an account with NPS, you get a Permanent Retirement Account Number (PRAN), which is unique and stays with you throughout your lifetime. This allows you to make your NPS account to become portable between jobs, even if your location changes. This ensures that your corpus remains constant.
Regulations: The National Pension System is regulated by the PFRDA, which is a government body, and follows transparent investment norms. Not only does it build trust, it also ensures that NPS accounts are among the lowest charging accounts in terms of maintenance, which, in the long term can lead to saving substantial amounts of money.
These benefits make the National Pension System, or the NPS, one of the most sustainable and stable retirement plans around. The smart segregated savings, coupled with long term returns and tax benefits make NPS a really worthwhile investment option. If you are looking for a suitable investment plan, you can choose to invest in NPS with KFintech, which is one of the Central Record Keeping Agencies in the country.

Featured Posts

User guide to opening an NPS account: A few points to consider

Tax Benefits of NPS: How you can reap them? A must read.

How can NPS Benefits help you in your golden years? Explained