Nation Pension Scheme (NPS) is a pension scheme sponsored by the government. Launched in 2004 for government employees, it was opened to all in 2009. Through NPS, a person can make regular investments into a pension account throughout their working life.

After retirement, a portion of the accumulated fund can be withdrawn as a lump sum. The remaining amount might be used to buy an annuity for securing a regular income post retirement.    Listed below are the benefits that you can avail through your NPS account.

Easy to open

A NPS account can be easily opened through any of its Point of Presence (PoP) centres or online via the eNPS portal. NPS provides you with a Permanent Retirement Account Number (PRAN), which is a 12 digit number that stays with you for the rest of your life.

Voluntary

Being a voluntary pension scheme, NPS gives you the flexibility of investing at any time during the financial year. The subscriber also has the flexibility of changing the amount that he/she may want to invest every year.

For example, if you invest Rs. 12000 in NPS during 2019-20, it is not mandatory for you to invest Rs. 12,000 during 2020-21. You have the flexibility to invest anything above Rs. 6000 during 2020-21 or subsequent years.

Tax saving

Investing in NPS can also help you save tax. An employee can claim a tax deduction under Section 80 CCD(1) by investing upto 10% of the salary (inclusive of basic and DA). He or she is eligible for a maximum tax deduction of upto Rs. 1.5 lakh under section 80C and 80CCE. The contribution made by the employer towards your NPS is exempted under section 80CCD(2).

In addition to the 1.5 lakh deduction you are eligible under section 80C, you can claim an additional deduction of Rs. 50,000 under section 80 CCD (1B). A self employed person can also claim a tax deduction under Section 80CCCD(1) for contributing up to 10% of gross income in NPS.

Flexibility

NPS offers you a range of different investment options from which you can make your choice. It also gives you the freedom to switch from one option to another, subject to certain factors. The returns from NPS depend on market conditions.

Portability

A very good feature of NPS is its portability. Unlike most other pension systems, NPS is portable across employers. Thus, irrespective of the number of jobs you switch, your retirement corpus is not impacted.

Regulated

The Pension Fund Regulatory and Development Authority (PFRDA) regulates NPS. It ensures that investment norms are transparent and that the NPS Trust (NPST) regularly reviews and monitors the performance of fund managers.

There are several benefits that are offered by an NPS account. An NPS account is easy to open, portable, regulated and voluntary. It also offers tax advantages. More importantly, NPS helps you secure your financial future.

Learn more about your Pension Plans here.

DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



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