NPS: Not just monthly pension in old age, you get these NPS benefits even in your youth; know about them
Retirement Planning: National Pension System (NPS) is a retirement scheme, which people consider as an investment tool to generate a retirement corpus and get a monthly pension post retirement. But the retirement scheme not only provides benefits in your old age, you may get many of them even in your young age.
NPS: Many new-age investors, private or government sector employees, sees National Pension System (NPS) as a prominent retirement scheme. It allows them to generate a sizeable corpus and monthly pension if they invest for a long time even if their investment amount is small. The central government has recently announced the Unified Pension (UPS) scheme, but NPS is unlikely to loose its charm soon. The scheme gives market-linked returns and the investor can choose market exposure according to their risk appetite and age.
Since it is a retirement investment scheme, most people consider NPS as a scheme which benefits only to retirees. But, do you know that NPS gives you many benefits even in your youth. It means even when NPS subscribers are accumulating money for their old age, they can take more benefits from NPS investing. Here they are-
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Tax benefits up to Rs 2 lakh
Investment in NPS Tier I account provides tax benefits. These benefits are available under Section 80CCD of the Income Tax Act, 1961. It also has two sub-sections - 80CCD(1) and 80CCD(2).
Tax benefits up to Rs 2 lakh
Apart from this, 80CCD(1) has another sub-section 80CCD(1B). You can get a tax exemption of Rs 1.50 lakh under 80CCD(1) and Rs 50,000 under 80CCD(1B). Apart from this tax benefit of Rs 2 lakh, you can also get more under 80CCD(2).
Benefits from the employer
An NPS subscriber is eligible for tax deduction up to 10 per cent of their salary plus dearness allowance (14 per cent if such contribution is made by Central Government) contributed by employer under Section 80 CCD(2) over the limit of Rs. 1.50 lakh provided under Section 80 CCE.
NPS lock-in makes your investment habit strong
The longer you invest in your youth, the higher your retirement corpus and monthly pension can be. NPS comes with a lock-in period, where you can withdraw money at the retirement age of 60. To make a large corpus under NPS, you need to invest regularly.
NPS lock-in makes your investment habit strong
While regular investment will make your investment habit strong, the lock-in period will restrain you from withdrawing that money for wasteful purposes.
NPS lock-in makes your investment habit strong
When their is no lock-in period, people may withdraw that money and use that money to buy a car, house, or in some medical emergency, which increases the tension of old age.
The more the risk, the higher the return
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 tools.
The more the risk, the higher the return
In youth, one has the ability to take more risks. In such a situation, you can select up to 75 per cent equity exposure, which will help you in accumulating a large corpus for your future.
The more the risk, the higher the return
With increasing age, when you feel that you need to take less risk, you can reduce equity exposure up to 25 per cent.