The National Pension System (NPS) is a government-supported pension scheme that allows individuals to save for their retirement and receive a regular income after they stop working. Under the NPS scheme, individuals can invest as little as 200 rupees per day to build a retirement corpus that can provide a pension of up to 50,000 rupees per month.
Know how to apply for NPS scheme:
To apply for the NPS scheme, individuals need to visit the National Pension System Trust (NPS Trust) website and register for an NPS account. They can also visit a Point of Presence (POP) or a Point of Presence – Service Provider (POP-SP) to complete the registration process. The POPs and POP-SPs are intermediaries that provide NPS-related services to investors.
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Once an individual has registered for an NPS account, they can start investing in the scheme by choosing a pension fund and an investment option. The NPS offers two types of investment options: the Tier I option and the Tier II option. The Tier I option is a mandatory account that individuals must open to participate in the NPS scheme. It is a long-term investment account that cannot be withdrawn before the individual reaches the age of 60. The Tier II option is a voluntary account that individuals can open in addition to the Tier I option. It is a flexible account that allows individuals to withdraw their funds at any time.
Know the benefits of NPS scheme:
Benefits of the NPS scheme include tax benefits, flexibility, and professional management of funds. Under the NPS scheme, individuals can claim a tax deduction of up to 50,000 rupees per year under Section 80CCD (1B) of the Income Tax Act. They can also claim an additional tax deduction of up to 50,000 rupees per year under Section 80CCD (1C) for contributions made to the NPS scheme by their employer.
The NPS scheme also offers flexibility to investors by allowing them to choose the pension fund and investment option that best suit their needs. There are several pension funds available under the NPS scheme, including the government sector pension fund, the corporate sector pension fund, and the alternative investment fund. Each pension fund has a different investment strategy, and individuals can choose the one that aligns with their risk tolerance and investment goals.
The NPS scheme is also professionally managed, with the pension funds overseen by experienced fund managers. The fund managers invest the funds in a diversified portfolio of assets, such as stocks, bonds, and real estate, to maximize returns and minimize risk.
Know who can apply for NPS scheme:
The NPS scheme is open to all citizens of India, including self-employed individuals, salaried employees, and business owners. It is also open to non-resident Indians (NRIs) and foreign citizens who are working in India. The minimum age to join the NPS scheme is 18 years, and there is no maximum age limit.
Example:
For example, consider a 25-year-old individual who wants to retire at the age of 60. If they invest 200 rupees per day in the NPS scheme, they can accumulate a retirement corpus of approximately 50 lakh rupees by the time they reach the age of 60. Assuming an average annual return of 8 per cent, this individual can receive a pension of approximately 50,000 rupees per month after they retire.
