A gift for retirement – National Pension Scheme! - fisdom

A gift for retirement – National Pension Scheme!

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Technology has played a vital role in improving the standard of living of mankind. It has also made people lazy. Not sure, whether I should thank technology or blame it for the simple reason that it has increased the average life expectancy to 70 years. It makes me think if I have been gifted such a long life, shouldn’t I plan for a healthy and happy retirement? Shouldn’t I be prepared for relaxed tomorrow?

I am pretty sure you guys have been of the same thought process. Are we on the same boat? Absolutely. Ladies and gentleman let me present you National Pension Scheme.

What is NPS?

The Government of India started the National Pension System under the Pension Fund Regulatory and Development Authority (PFRDA). National Pension Scheme is an old age security coverage to all citizens who have opted out for this scheme. It is a voluntary scheme.

Why should I invest in NPS?

  1. Tax Deduction: Additional tax deduction of Rs.50,000 can be availed via NPS under section 80CCE other than 1.5 lakh deduction which we get under 80C.
  2. Returns: You can expect a return of 8% – 9.5% from NPS. It is totally depending upon the investment choice you do (Ref point: investment choice under NPS below.
  3. Regular income during retirement days: There is no need for asking monetary help from your near and dear ones during our retirement. NPS will take care of your monthly expenses.
  4. Flexible: NPS account can be operated from every nook and corner of India irrespective of individual employment and location. You can also switch between different investments funds in NPS.
  5. Portable: 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 NPS account will always be the same no matter wherever you go. Even if you leave your job, you can continue using the same account.           

Who can invest in NPS?

All the State and Central Government employees, as well as citizens of India that fall between the age group of 18 to 60 years, are eligible for investing in the NPS. The pre-existing pension account holders can also apply under this scheme for fresh registration.

Types of accounts under National Pension Scheme:-

1. Tier 1 Account: It is a pension account with limitations on withdrawal. Before you hit 60 years, you can withdraw 20% of the contribution. A subscriber required to make an initial contribution of 500 at the time of registration. Subsequently, the subscriber needs to make a minimum contribution of INR.1,000 in any financial year. Minimum amount per contribution is INR. 500. Tax benefits can be availed on money deposited in this account.

2. Tier 2 Account: A subscriber required to make an initial contribution of INR.1,000 at the time of registration. Subsequently, the subscriber needs to make a minimum contribution of INR.250 in any financial year. Tier 1 account is a prerequisite for Tier 2 account.

Opening 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 us. We are a new-age app that makes it easy to invest in mutual funds.

How to exit from NPS?

When you hit 60years of age, you can withdraw up to 60% (Out of which 40% is tax-free) of accumulation as the lump sum and rest 40% will be converted into a pension.

If you want to exit from NPS before 60 years of age, then you are allowed to withdraw only 20% accumulated amount. Pension product will be purchased by the remaining 80% of your fund.

However, in case the death of the subscriber, a nominee is allowed to withdraw 100% of NPS.

 

Conclusion

The movie is never a good movie until the climax is awesome. I rest my case!

Happy Investing!

Share with your friends!

Share with your friends!

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