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The government of India introduced the National Pension System, also known as the National Pension Scheme, to safeguard the financial future of Indian citizens. Numerous benefits are associated with NPS. This makes NPS an attractive option to plan for the golden years. In this blog, we’ll discover the key National Pension Scheme benefits and why you should consider investing in it.
The National Pension Scheme encourages individuals to invest in a pension account regularly during their working tenure. The NPS is not limited to just employees in the organized sector; it is open to all Indian citizens between the ages of 18 and 70. Subscribers can take out up to 60% of their accumulated corpus and buy annuities from the remaining 40% to receive the pension.
National Pension Scheme – Benefits
Let’s have a look at the benefits of the National Pension Scheme.
- Attractive Tax Benefits: One of the advantages of the NPS scheme is the tax benefits it offers. Contributions made to the NPS qualify for tax deductions under Section 80C of the Income Tax Act, allowing you to save up to ₹1.5 lakh annually. Additionally, contributions up to ₹50,000 in the NPS qualify for an extra deduction under Section 80CCD(1B), making it a great option for those seeking to maximize their tax savings.
- Diversification of Investment: The national pension scheme offers a diverse investment strategy. Subscribers can choose from a mix of equity, corporate bonds, government securities, and AIFs. It enables them to customize their portfolio based on risk appetite, retirement goals, and investment horizon. It empowers subscribers to take control of their retirement savings.
- Potential of High NPS Returns: The National Pension System can provide high returns. NPS provides market-linked returns to its subscribers as it invests in equities, corporate bonds, government securities, and AIFs. Moreover, the rate of interest in NPS is on the higher side compared to PPFs and FDs.
- Regulated by the Government: The NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). This government entity ensures the transparency and security of investments. This is one of the key advantages of NPS, which builds trust among its subscribers.
- Long-term Financial Security: An NPS subscriber can build a substantial retirement corpus over time. Investment in NPS can grow significantly with time thanks to the power of compounding. It provides a reliable source of income after retirement. Individuals can maintain their lifestyle even after they stop working.
- Low-cost Investment: Planning for retirement presumably requires more investment. This may not be the case with NPS. Subscribers can open an NPS account with ₹500 only, and they have to maintain the account with an annual investment of ₹1000 only. This makes NPS stand out from other retirement savings schemes.
- Upon reaching retirement age, NPS subscribers have the option to withdraw a portion of their accumulated corpus and invest the remaining amount in an annuity. This provides a steady stream of income throughout retirement, ensuring you have financial support even after retirement.
What are the benefits of the NPS calculator, and how can you use it to calculate your accumulated corpus and pension annuity amount? Click here to know.
Final Thoughts
With its attractive tax benefits, flexible investment options, and the assurance of government regulation, the NPS is an excellent choice for anyone looking to secure their financial future. Subscribers can have peace of mind knowing that their money is invested and regulated by the Government of India. They can build a stable income for years to come.
