Wealth Guide: Why NPS is the right investment plan to secure your “golden years”; top 5 benefits?

One of the most procrastinated long-term goals of a human’s life is the goal for Retirement or your Golden Years that proffers you the time to catch up on things you have missed out in early years for personal and/or professional reasons.

With the medical and technological advancement, the life expectancy in India has risen thus giving a good period to live freely and work on that bucket list you kept postponing for all these years.

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Therefore, it is quintessential to be sincere with your financial planning for your autumn years.

Ankit Agarwal, Managing Director, Alankit highlights 5 benefits of NPS and why it is an important tool in retirement planning:

The NPS or National Pension System is a market-linked voluntary contribution retirement scheme that allows you to create a retirement corpus fund through which you can get a pension for your entire retired life.

This scheme is unanimously available for every citizen of India who falls in the age group of 18-70 years. However, you need to note that you can make withdrawals only once you reach the age of 60 years.

August 2021 has been a milestone for NPS as it witnessed its subscription crossing over 1,43,90,544 which was worth more than 6.90 Lakh Crores of Asset Under Management (AUM) respectively.

It is the reason that we can safely say that the popularity of NPS has grown in leaps and bounds in recent years and is proving to be a renowned saving tool among the investing community.

NPS is a wonderful substitute for other investment options existing that proffers an additional tax benefit. Certain tax benefits available under National Pension Scheme that are worth mentioning are:

*        Up to Rs. 1,50,000/ - u/s 80CCE (individual tax limit)

*        Up to Rs. 50,000/ - u/s 80CCD(1B) (individual tax limit)

*        Up to 10% of Basic Salary - u/s 80CCD(2) (Through Employer contribution)

Apart from the tax benefits, NPS is also helpful in securing investors’ golden years. This is since it brings the concept of monthly pension enjoyed by all the citizens of India in the age group of 18-70 years.

It gives you the liberty of investing up to 75% of your fund into equity. Since NPS is a market-linked investment, the return offers are known to beat inflation over the long term. NPS is a good investment choice as it invests its corpus into the equity and debt portion as per the investor’s risk appetite.

There are multiple benefits associated with NPS that make it the right investment choice for your golden years.

Constant Source of Income after Superannuation:

NPS allows you to have a regular source of income throughout your life since it creates a retirement corpus for you to cover your regular expenses that never stops even after retirement.

Inflation also needs to be brought into consideration as it harshly affects our day-to-day life. Thus, the monthly pension scheme of NPS acts as a saviour during your autumn years for the financial support required at this stage of life.

Advantage of Fund Allocation Flexibility:

NPS gives the investor the liberty to design their fund portfolio according to their risk appetite. This means the investors can distribute funds amongst four assets.

You have the liberty of re-arranging your assets at any point in time if or when you feel dissatisfied with the current allocation.

Low-Risk Investment:

In comparison to all the investment options available in the market, NPS happens to be the lowest risk option comparatively. Nonetheless, the scheme being owned by the Government of India gives it an edge over others by providing a risk cap range between 50% to 75% on the equities.

In case you plan to start investing in NPS when you hit 50 years, you get a risk exposure of 75% which keeps diminishing by 2.5% every year until you reach 60 years of age. This exposure to equity proffers high-earning opportunities with minimal risk exposure.

Tax Saving Feature:

One of the key highlights of the NPS account is its tax-saving benefits that are higher than any other option available currently. According to this, under Section 80C, the contributions made by you towards NPA are eligible for tax deduction up to Rs. 50,000/- NPS offers tax benefits over and above Section 80CCD(1) of the Income Tax Act.

Also do remember that over and above the exemption, you can further claim for investing Rs. 1,50,000/- under section 80C.

This way you can save up to a considerable additional amount on tax every year. However, one needs to keep in mind that only Tier-I account holders can enjoy the mentioned tax benefits only.

Returns Guaranteed:

Even though a major portion of the investment in NPS is in equities which might not offer an assured return, however, the overall returns from the NPS scheme are assured.

Furthermore, the returns suggested by these schemes are relatively higher than other investments such as PPF or FDs.

The amazing financially amicable investment options available now under the National Pension Scheme for the common populace of India makes the NPS scheme further remunerative.

It is for the fact that it opens a window of prospects for the major portion of the residents of the country.

Ergo, NPS delivers a potential opportunity to create a retirement corpus for everyone irrespective of the age group they belong to and they can simply enroll in a scheme that caters to no barriers.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)