How to plan your retirement and taxes with NPS? 

The National Pension System commonly known as the National Pension Scheme is a voluntary retirement program for many individuals. NPS comes with various tax benefits. In this blog, we’ll explore the same. But first, understand NPS briefly. 

The National Pension System – A Brief 

As mentioned above, NPS is a voluntary retirement saving scheme for public and private sector employees. It gives an advantage to build a retirement corpus and financially secure their future. Any Indian citizen between the ages of 18 and 70 can invest in NPS with a small amount of ₹500. There are a few benefits of investing in the National Pension System and those are: – 

1. It is regulated by PFRDA (Public Fund Regulatory and Development Authority), a government entity that oversees the transparency of the scheme. 
2. It offers potentially higher returns than any traditional retirement saving scheme such as Fixed Deposit (FD) or Public Provident Fund (PPF). 
3. It invests in equities, corporate bonds, government securities, and AIFs, providing a diverse opportunity to the investors. 
4.  It allows investors to choose portfolio allocation between auto or active mode. Auto choice allocates an investor portfolio according to his/her age. On the other hand, active choice enables investors to allocate portfolios as per their choice.
5. Any Indian citizen can invest in NPS from anywhere in the country.  

The National Pension Scheme Tax Benefits 

1. NPS Tax benefit under section 80C of the Income Tax Act – Any subscriber can claim a tax benefit of ₹1.5 lakh under this section. 
2. NPS tax benefit under section 80CCD 1(B) of the Income Tax Act – Any Tier I subscriber will get an additional tax benefit of ₹50,000 under this act.
3. EEE tax exemption – While investing in NPS, when a subscriber is retired then his/her 60% of accumulated corpus will come under the EEE (Exempt Exempt Exempt) tax category. It means he/she doesn’t have to pay any tax on the collected corpus.
    

Are you looking for ways to invest in NPS online? Click here. 

Types of NPS account 

There are two types of NPS accounts, Tier 1 and Tier 2 accounts. While Tier I account offers various tax-saving benefits, on the other hand, Tier II account does not come with any tax benefits. Tier II is a savings account and you can only open it after activating the Tier I account. 

Conclusion 

To conclude, NPS can be an important instrument that can provide you with a financial safeguard during your retirement years. Additionally, it comes with various tax-saving benefits under Income Tax Section 80 (C) and 80 CCD 1(B). To enjoy your retirement years tomorrow and save your taxes today, NPS can be an attractive retirement plan to choose from.