NPS SCHEME: Every working person has the goal of having a regular income even after retirement. NPS was created with this in mind. This scheme inculcates the habit of disciplined savings during their career and converts those savings into a regular pension after retirement. This way, individuals don’t have to worry about running out of savings and have a stable source of income throughout their life.
How NPS Boosts Your Investments
The National Pension System invests funds in equities, corporate bonds, and government securities. This mix maintains a balance between growth and stability. Young investors can choose more equity investments to benefit from long-term compound interest. As they age, they can gradually increase their investments.
Low Costs Bring Greater Returns
The biggest advantage of NPS is its extremely low fund management costs. Compared to other market products, the fees are very low, allowing a large amount of investment to actually work in the market. In the long run, even this small cost difference can transform your investment into a substantial retirement corpus, without incurring additional risk.
Tax Saving Benefits
NPS offers investors several tax benefits. Investments made in NPS are eligible for tax deductions under Sections 80C and 80CCD(1B) of the Income Tax Act. Tax benefits are also available on employer contributions. Up to 60 percent of the total amount withdrawn at retirement is completely tax-free, while the remaining 40 percent is used to purchase a pension. Thus, NPS provides superior returns even after tax.
Flexibility and Choice in Investment
NPS offers investors two options: active and automatic. In the active option, investors can decide the amount to invest in equity or debt, while the automatic option adjusts the investment ratio based on age. Investors can change fund managers or adjust the allocation once a year. Partial withdrawals are also allowed under special circumstances, making the scheme flexible.
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Variation in Income After Retirement
When an investor reaches the age of 60, they can withdraw a lump sum from the NPS and purchase an annuity with the remaining amount. This annuity provides a fixed monthly income in the form of a lifelong pension. Various options are available, including a lifelong pension, a joint pension for the spouse, or plans with a return on investment, ensuring regular income even after retirement.
Complementary
NPS can be used in conjunction with investment instruments such as EPF, VPF, PPF, and mutual funds. While EPF provides stable interest and equity funds offer growth, NPS combines both with low costs, tax efficiency, and a lifelong pension.