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3 Reasons to invest in NPS

Written by - Akshatha Sajumon

April 7, 2020 3 minutes

3 Reasons Why, NPS (National Pension Scheme) deserves your attention!

The National Pension Scheme (NPS) is regulated by the Government of India which is probably why people think very highly of this retirement plan. National Pension Scheme has a lot of potentials, in terms of an investment plan and a tax-saving instrument. But there is more to NPS than meets the eye. We’ll delve into that, followed by a few things to keep in mind about NPS.

Reason 1: Tax Benefits of National Pension Scheme

Based on Union Budget 2019, NPS now qualifies to be an Exempt-Exempt-Exempt (EEE) category product. This means that NPS tax is exempted at all 3 stages. Tax deductions up to 1.5 lakh per annum under Section 80CCD of the Income Tax Act. Additional tax deduction up to Rs. 21,372 under Section 80CCD(1B) in a financial year. (only Tier 1 accounts are eligible, not Tier 2). At term completion or 60 years, 60% of the amount received is free from tax, while the rest 40% has to be invested in annuity.

Reason 2: Retirement Planning made easy

You can expect a return of up to 12% NPS. The return percentage is dependent on the type of National Pension Scheme that an individual chooses which is then calculated by the government-appointed Pension Accounting Office. The scheme investor is eligible to receive monthly pension amounts to be able to sustain a comfortable living for their future. 

An NPS account can be operated from every nook and corner of India irrespective of individual employment and location. You can also switch between funds in NPS. 

If you retire at 60, 40% of withdrawals are free from tax. From the balance 60%, 40% minimum has to be used to purchase an annuity. The remaining 20% can be used to either buy an annuity or withdrawn by paying tax according to the tax slab. However, if you retire before 60 years, you would use 80% of your corpus to buy an annuity and withdraw the remaining 20% by paying the amount taxable according to the tax slab. Remember, the taxation of the amount via annuity is according to your tax slab. In the event of the account holder’s death, the nominee receives the entire amount.

Reason 3: It’s convenient

In terms of flexibility, NPS scheme holders can move from one sector to another like Private to Government or vice versa or Private to Corporate and vice versa. The account always stays the same no matter wherever you go even when you are unemployed. 

Where Can You Open an NPS Account?

Opening an NPS account is not that difficult now. It’s just a click away. You can easily invest in NPS online through the Fisdom App. We are a new-age app that makes it easy to invest in mutual funds, in a matter of minutes.

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