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Most people dream of living a peaceful and stress-free life after retirement. To achieve this dream, you must plan your retirement early on. Retirement planning involves the allocation of savings to manage post-retirement financial goals.
One needs time to build a substantial corpus, and you should possibly plan for at least 20-30 more years after retirement for you and your family’s financial security. You need to ensure a steady source of income, which is why NPS is the best retirement option. This pension plan offers financial stability by providing a regular income source after you retire from your professional service.
What is NPS?
NPS or National Pension Scheme is a social security initiative by the Indian Government to encourage individuals to build a retirement corpus. The program is open to all Indian citizens within the age bracket of 18 years to 60 years. A person can apply for the scheme if he or she is 60 years old at the time of application submission.
There are several NPS benefits for employers, employees, and the self-employed. If employees and self-employed individuals deem fit, they can subscribe to the NPS independently. But employers can also offer PF or NPS to their employees.
The NPS has a minimum contribution of at least ₹1000 per year, but it is advisable to contribute more to enjoy a reasonable pension post-retirement and make the most of the NPS retirement benefits.
Is NPS a Good Option for Retirement?
The many NPS employee retirement benefits listed below will help you decide whether you should invest in the scheme or not.
- NPS is an affordable and transparent scheme. You can check your investment value regularly.
- A significant portion of the NPS contribution is allocated to equity schemes. Equities provide higher returns than traditional tax-saving products like PPF. NPS has an interest rate of 9% to 12% and is best suited for individuals who wish to accumulate funds and live a financially secure life after retirement.
- If the performance of the investment is not at par with your expectations, you can change the pension scheme under NPS.
- Tax deductions are another NPS benefit that an individual can enjoy. The NPS employer contribution and employee contribution are eligible for tax deductions of up to ₹1,50,000 under Section 80C of the Income Tax Act.
- The scheme is voluntary and lets subscribers contribute as and when convenient during a financial year.
Withdrawal Rules After 60 Years of Age
What most people don’t know is that you are not eligible to withdraw the entire NPS contribution after your retirement. It is mandatory to leave at least 40% of the corpus, which is used to give you a monthly pension. You can withdraw the remaining 60%, and fortunately, it does not add to your tax liability.
Conclusion
The retirement benefits for NPS employees are plenty. They include higher returns, tax benefits, premature withdrawals, flexibility, and ease of use. The scheme is regulated by the Pension Fund Regulatory and Development Authority of India, which means that there is transparency and reliability for the investors.
