Securing Your Future: A Deep Dive into National Pension Scheme (NPS)

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An Overview

Are you planning for your retirement? Do you want to secure your future with a regular income after you stop working? If yes, then you can consider investing in the National Pension Scheme (NPS) in India.

What is NPS?

NPS is a voluntary and long-term investment plan for retirement under the purview of the Pension Fund Regulatory and Development Authority (PFRDA) and the Central Government. It is open to all citizens of India between 18 to 70 years of age, whether they are from the private, public or unorganised sectors.

NPS allows you to make defined contributions at regular intervals during your working life. You can choose from various investment options and fund managers to suit your risk appetite and financial goals. The returns on your investments depend on the performance of the market-linked instruments such as equities and debts.

What are the benefits of NPS?

NPS offers several benefits to its subscribers, such as:

  • Tax benefits: You can claim tax deductions on your contributions to NPS under the Income Tax Act, 1961. The maximum deduction allowed is Rs. 1.5 lakh per annum under Section 80C and an additional Rs. 50,000 per annum under Section 80CCD(1B). Moreover, the maturity amount and the annuity income are also exempt from tax.
  • Flexibility: You can choose the amount and frequency of your contributions to NPS, subject to a minimum of Rs. 500 per month or Rs. 6,000 per annum. You can also switch between different investment options and fund managers up to four times a year. You can also open multiple NPS accounts with different nominees.
  • Portability: You can transfer your NPS account from one employer to another or from one location to another without any hassle. You can also access your NPS account online through the eNPS portal or the mobile app. You can make contributions, check your balance, change your details and download statements through the online platform.
  • Security: NPS is regulated by PFRDA, which ensures the safety and transparency of the scheme. The funds are managed by professional fund managers who are appointed by PFRDA after a rigorous selection process. The fund managers are monitored and evaluated by NPS Trust, which is the trustee of the funds under NPS.

How to join NPS?

You can join NPS by following these simple steps:

  • Register online: You can register online through the eNPS portal by providing your Aadhaar or PAN details. You will get a Permanent Retirement Account Number (PRAN), which is your unique identity number for NPS. You will also get an online password to access your NPS account.
  • Choose your investment option: You can choose between two investment options: Active Choice and Auto Choice. In Active Choice, you can decide the allocation of your funds among three asset classes: Equity (E), Corporate Bonds © and Government Securities (G). The maximum equity exposure is capped at 75% for subscribers below 50 years of age and reduces gradually thereafter. In Auto Choice, the allocation of your funds is done automatically based on your age and risk profile.
  • Choose your fund manager: You can choose from eight fund managers who are empanelled by PFRDA to manage your NPS funds. You can compare their performance and fees on the PFRDA website.
  • Make your contribution: You can make your contribution to NPS through online or offline modes. You can use net banking, debit card, credit card, UPI or e-wallets to make online payments. You can also visit any of the Points of Presence (PoPs) or Nodal Offices to make offline payments. You can find the list of PoPs and Nodal Offices on the PFRDA website.

How to withdraw from NPS?

You can withdraw from NPS in two ways: partial withdrawal and complete withdrawal.

  • Partial withdrawal: You can withdraw up to 25% of your own contributions (excluding employer’s contributions) after completing three years of subscription. You can make partial withdrawals for specific purposes such as higher education, marriage, medical treatment, purchase of house or business. You can make partial withdrawals up to three times during the entire tenure of your subscription.
  • Complete withdrawal: You can withdraw the entire amount from your NPS account when you attain 60 years of age or when you decide to exit the scheme before 60 years of age. However, you have to use at least 40% of the corpus to buy an annuity plan from a PFRDA-approved annuity service provider. The annuity plan will provide you with a regular income for the rest of your life. The remaining 60% of the corpus is paid to you as a lump sum, which is tax-free.

Wrapping Up

NPS is a smart way to plan for your retirement and secure your future. It offers you multiple benefits such as tax savings, flexibility, portability and security. It also gives you the opportunity to earn market-linked returns and create a large corpus for your golden years. You can join NPS online or offline and start investing with a minimum amount. You can also withdraw from NPS partially or completely as per your needs. So, what are you waiting for? Join NPS today and enjoy a happy and peaceful retirement.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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