Back to Blog
To start anything in life is one of the hardest decisions. Whether you need to start a new job or a new business venture. Although, planning for your retirement and investing in NPS is not a difficult task to start.
The National Pension System widely known as the National Pension Scheme or NPS has many scheme benefits. From low contributions to flexibility to invest to tax benefits, NPS has almost every feature for an investor to look for to plan his retirement. And not to miss, National Pension Scheme returns are potentially on the higher side. So, how can it benefit you?
In this blog, we’ll explore the benefits of the National Pension Scheme and give you reasons to invest in it.
NPS Benefits
Potential of High Returns: The National Pension Scheme returns are linked with the market and it has more potential than traditional investment or saving schemes such as FD and PPF. NPS invests in equities, alternative investments, corporate bonds, and government securities that provide diversity to your investment.
Investment Approach: An investor can invest using the ‘active’ or ‘auto’ method. NPS gives you the flexibility to choose your investment process. In active choice, you can allocate your assets and decide how much to invest in various categories. It also allows you to select the fund manager. Active choice lets you decide your approach, whether you want to invest aggressively, moderately, or conservatively. If you don’t want to manage your financial portfolio then you can choose auto mode. It allocates your asset dynamically as per market conditions.
How can you calculate your NPS corpus? Click here to find out.
EEE Tax Category: Contribution to NPS comes under the exempt-exempt-exempt (EEE) mode of taxation wherein the amount contributed to NPS, the income generated, and the amount of maturity are all tax-exempt. Additionally, you will get tax benefits of up to ₹1.5 lakhs under section 80 CCD (1) of the Income Tax Act. Furthermore, there is an additional deduction of ₹50,00 under section 80 CCD (1B) of the Income Tax Act over and above the ceiling of ₹1.5 lakh.
NPS Categories: An investor can start investing in NPS through Tier 1 and Tier accounts. However, it is mandatory to have Tier 1 before you open a Tier 2 account. If you are planning for retirement, a Tier 1 account can be your best option, however a Tier 2 account offers better flexibility in terms of withdrawals.
NPS Withdrawals: Contributions in NPS are not only tax-exempt but also withdrawals. You can take up to 60% of your corpus upon maturity and there will be no tax on it. Moreover, 40% of the remaining corpus can be used to buy an annuity so that you can receive it in the form of a monthly pension amount.
Low-Cost Investment: This is one of the attractive features of NPS. You can contribute to NPS with ₹500/- per month or ₹1000/- annually. This makes NPS one of the popular retirement plans in India.
To start investing in NPS, click here.
Conclusion
NPS gives the freedom to benefit from the nation’s economic growth until you retire. From the potential of high returns to tax benefits to flexibility to invest, NPS has become one of the lucrative retirement planning schemes for individuals. You can start investing in NPS without worrying about your future, you only need to plan for your retirement.
