NPS can benefit in 4 ways even before your retirement; very few people know about it
National Pension Scheme (NPS) is a popular scheme for retirement planning. The scheme is market-linked, where you invest every month till the retirement age of 60. At retirement, one can withdraw up to 60 per cent corpus and purchase annuities from the rest of the amount. One may not withdraw any amount at retirement and may purchase annuities of the entire corpus. The government invest annuities to give the monthly pension to the NPS account holder. But do you know even before you reach your retirement age, NPS contributions help you in different ways. Know about those benefits here-
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Tax benefits
Deposits in NPS provides tax exemption under Section 80CCD of the Income TaxAct, 1961. It also has two sub-sections - 80CCD(1) and 80CCD(2). Apart from this, 80CCD(1) has another sub-section 80CCD(1B).
Tax benefits
Under 80CCD(1), you can get a tax exemption of Rs 1.50 lakh, while under 80CCD(1B), you can get a tax exemption of Rs 50,000. Apart from this exemption of Rs 2 lakh from 80CCD(2), you can also get more income tax exemption.
Benefits from the employer
Your employer gives you tax exemption on your investment in NPS. Under this, you can invest up to 10 per cent of your basic salary and dearness allowance in NPS and you will get tax exemption on it. On the other hand, if you are a government employee, then this figure can be up to 14 per cent for you.
Benefits from the employer
Most companies provide NPS facility. You can invest in NPS through the company's HR. The good thing is that you will be able to get additional tax exemption. You will get tax exemption in your youth, meaning your money will be saved, which will be useful for you.
Money will not be spent wastefully
When a person gets a job, in the initial days, everyone spends money here and there. However, after a few years, everyone starts understanding that to live a better life in old age, it is necessary to invest in youth itself. Although there are many schemes and tools for investment, but the biggest advantage of NPS is that you can withdraw the money deposited in it only after retirement.
Money will not be spent wastefully
This means that its lock-in period is not 5 years or 15 years like other schemes, but is up to the age of 60 years. In this way, the investment of the youth remains safe for old age. If the lock-in is less, then many times people use that money to buy a car or house or in some medical emergency, due to which the security of old age becomes weak.
Return according to risk
In all investment schemes, you get either a fixed return or a return over which you have no control. If you invest in NPS, you can decide for yourself how much money you want to invest in the stock market and how much in fixed return instruments.
Return according to risk
In youth, one has the ability to take more risks. In such a situation, you can get more returns by taking more risks, which will help you in accumulating a large corpus in the coming days. With increasing age, when you feel that you need to take less risk, then change the investment in NPS accordingly, which will benefit you.