The Indian Government regulates a variety of revenue-generating and investment schemes that not only help to plan future wealth but also offer tax benefits. Out of which the most popular choice among salaried individuals is NPS or National Pension Scheme, which is managed by National Pension System Trust. This scheme allows low-income generators to save little by little with monthly instalments to accumulate a huge corpus of funds along with interest for their retirement.
What is the NPS Scheme?
National Pension System Trust is a specialised unit of the Ministry of Finance’s Pension Fund Regulatory and Development Authority. Under NPS, the pool of funds accumulated from subscribers is invested in a variety of investment streams. And the subscribers are allowed to choose the preferred investment streams in which their funds are to be allocated.
“The National Pension System (NPS) pools individual savings into a pension fund, which is then invested by PFRDA-regulated professional fund managers in accordance with approved investment guidelines in diversified portfolios that include shares, corporate debt obligations, government bonds, and bills,” mentioned DNA India.
Who Should Invest in NPS?
Anyone who is interested in creating his or her future wealth for the purpose of retirement, a child’s higher education, marriage, etc can sign up for NPS or National Pension Scheme. Especially those who are private sector employees. So, an investment of this type will surely change your life forever.
Furthermore, NPS schemes provide many other benefits to an investor, like tax deductions under section 80C, a choice to regulate your funds and allocate them to a variety of investment classes, guaranteed returns with equity investments, higher returns than traditional investment schemes and more.
NPS Tax Benefits
- Tax deductions are available under section 80C till ₹1.5 lakh contribution amount in a financial year.
- “10% of the salary is the maximum deduction that can be made under section 80CCD(1), but not more. This cap is 20% of the taxpayer’s gross income if they are self-employed,” mentioned by DNA India
- “Any excess self-contribution (up to Rs 50,000) may be claimed as an NPS tax benefit under section 80CCD(1B). Therefore, the programme permits a total tax deduction of up to Rs 2 lakh.”
- ‘You should keep investing until you are 60 years old as a pension plan. However, you may withdraw up to 25% for specific purposes if you have been investing for at least three years,” further wrote