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The National Pension Scheme (NPS) is a long-term investment plan for retirement to which employees from the public, private, and even unorganised sectors are eligible. Individuals must invest in the scheme regularly during their employment. Upon retirement, individuals can withdraw a specific percentage of the corpus and receive a monthly pension from the balance. The scheme is geared towards helping people live a comfortable life post-retirement.
This article will explore the benefits and advantages that come with NPS.
Advantages of the National Pension Scheme
Listed below are some of the National Pension Scheme benefits that continue to make it a popular investment option for those looking to secure their future.
Low-cost: The NPS is the lowest-costing pension scheme in the world. If you possess a NPS Tier-1 account, the minimum investment amount required yearly is Rs. 6,000. The minimum mandatory investment amount for a Tier-2 NPS account is Rs. 2,000.
Power of Compounding: The returns generated for your retirement fund accumulate much faster due to the compounding effect of the scheme. Further, the charges and expenses of maintaining an NPS account are low, meaning that earnings are maximised.
Diversification & Reliability: The NPS scheme allows investors to diversify. By investing in NPS, individuals get access to equity as well as the debt market. Since professional fund managers manage the investments, individuals can be optimistic about the performance of their NPS fund.
Flexibility: The NPS scheme also offers flexibility. Individuals are allowed to decide whether they wish to allocate their investments on their own. This means you can choose the balance between government securities, corporate bonds, and equity. However, for newer investments, there is an auto-choice option that ensures assets are allocated automatically. Hence, the NPS scheme has measures and safeguards that make it accessible to all investors.
Ease of Use: Registering an NPS account has become a straightforward process. Most authorised banks have an online process through which individuals can apply. After your account has been opened, you can access it from anywhere in India. Your Permanent Retirement Account Number (PRAN) that is allotted to you stays with you throughout the period of your NPS scheme, allowing you to change jobs and employers without having to make any alterations to your NPS account.
Higher Returns: Since a portion of NPS investments goes into equities, there is a good chance for investors to earn higher returns than they would through other low-risk schemes such as Public Provident Funds.
Tax Benefits: There are numerous provisions in the Income Tax Act, such as Section 80C and Section 80CCD(1B), that give individuals access to tax deductions on up to Rs. 2,00,000 investments. NPS account holders also enjoy tax benefits on partial withdrawals, the corpus when it matures, and the amount used to purchase annuities.
Conclusion
The NPS scheme has become extremely popular amongst Indian citizens. Due to national pension scheme benefits, many Indian citizens are comfortably enjoying their retired life. If you are also planning to invest in your retirement fund, use a National Pension System (NPS) Calculator to start planning your future. You can access the NPS Calculator on the top financial websites.
