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When you start a business or switch to a new career, what would you look at? ‘What would I get in return? How will it be beneficial?’ The answer is simple: ‘benefit’. Remember those days when we would choose a college and a course to pursue?
The scenario of investing is no different. Whether you invest a small amount or a huge amount, you tend to look for benefits. What would you look for when you invest in NPS? The main thing that comes to mind is – benefits. The earning potential of NPS is higher as compared to other fixed-income schemes.
There are many benefits of NPS. We will discuss some of them in this blog.
National Pension System (NPS)
Returns/Interest
The National Pension System (also known as National Pension Scheme) benefits the investor as it offers returns that are relatively higher than other tax-saving investments like PPF, although it may not offer guaranteed high-returns.
Risk Analysis
Currently, the National Pension System’s equity exposure is capped between 75% and 50%. The cap for government workers is set at 50%. The equity portion will decrease by 2.5% annually in the range specified starting in the year the investor turns 50. However, the cap is set at 50% for investors 60 years of age and older. As a result, the risk-return relationship is stabilised in the interest of investors, protecting the corpus to some extent from the volatility of the equity market.
Flexibility
This is another National Pension System benefit as it gives investors the power to choose their fund manager from a pool of 7.
Liquidity
After 60 years, the remaining 40% may be invested in any annuity plan, while the remaining 60% may be withdrawn. After paying for three full years, you can also withdraw up to 25% of the money for any emergency needs.
Diversification
Risk is reduced through diversification because NPS gives you the option to select from a small number of asset classes, including equity, corporate bonds, government securities, and alternative funds.
Benefits from Taxation
The NPS programme allows for a tax benefit of up to two lakhs. The NPS scheme has three provisions that govern the tax benefits. 80CCD (1), 80CCD (1B), and 80CCD (2) are the three. Every person will be given a tax-free lump sum withdrawal at retirement, up to 60% of the total.
Low Cost
One can invest as little as ₹1000 in the NPS scheme each fiscal year. The minimum contribution needed to open an account is ₹500.
Conclusion
Every investment you make today has to have a purpose. While investing in the National Pension System (also known as National Pension Scheme), you tend to look at its benefits while achieving your financial goals.
