All of us wish to be financially secure, and one of the ways to attain a level of financial security is to start saving early. You need to diversify your investments and invest in different securities that can help you build a decent retirement corpus. A good rule of thumb is to invest in market-linked savings schemes that also offer good returns and a source of income, especially in the years when your income sources begin to diminish. One such scheme is the National Pension Scheme. Here are all the NPS scheme details you need to know.
NPS – what is it?
Launched by the Central Government, the National Pension Scheme (NPS) is a social security initiative. It is a pension programme that was first launched for government employees in 2004 but was later extended to all Indian and NRI residents in 2009. The NPS scheme enables investors to invest in a pension account. Investors can contribute to the pension account regularly throughout their work-life and withdraw a certain, specific percentage of their corpus. Upon retirement, investors can receive the remaining funds in the form of monthly pension.
What are some of the salient features of NPS investments?
NPS investments can prove to be rather beneficial for all investors. Some of its salient features include
Of the sums deposited in the NPS scheme, a portion goes towards equity investments.
While the equity investment does not guarantee returns, investors can still earn considerably higher savings as compared to conventional tax-saving instruments – PPF, for instance.
NPS is a portable scheme which means you can continue investing in it, irrespective of how many jobs you change or which city (or country) you move to.
Investors may change their fund managers if they are unhappy with the fund’s performance.
Tax deductions under the NPS scheme
One of the crucial NPS details to remember is that the scheme is a tax-efficient scheme as well. NPS investors may avail tax benefits under Sections 80C and 80CCD of the Income Tax Act of 1961. Apart from the basic tax deduction of ₹150,000 available to all tax-paying citizens, NPS investors may also avail an additional tax deduction of ₹50,000 under section 80CCD(1B). As such, you can avail a maximum tax deduction of ₹200,000 against NPS investments per financial year.
Opening an NPS account – offline and online methods
You can open the NPS account offline, by locating a Point of Presence (PoP), which could be a bank or an investment company. You may also open NPS account online by logging on the NPS Trust website at https://enps.nsdl.com/eNPS/NationalPensionSystem.html. In both cases, you are allotted a Permanent Retirement Account Number or PRAN number, which you can use to login to your account and make your NPS contributions.
Final word: Without adequate savings, retired life can be incredibly tough. Thankfully, NPS benefits investors from both the private as well as public sectors of India. The voluntary scheme enables you to lead a financially secure retirement life.
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