Topic: NPS

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Old Pension Scheme Vs New Pension Scheme! What are the key differences between them?

March 31, 2025

Retirement planning is significant for your golden years. Investors choose a retirement plan or a pension scheme to meet their post-retirement daily expenses and financial dreams. The Indian pension system has gone through many changes over the years. There are two major retirement plans: an old pension scheme and a new one. In this blog, we’ll explore the key differences between the two.

Old Pension Scheme: An Overview

The Old Pension Scheme (OPS) was a traditional retirement savings plan, introduced in the 1950s for government employees. Under the scheme, beneficiaries receive a fixed pension of 50% of their last drawn basic salary, or the average of their last ten months’ salary, whichever is more beneficial. A key advantage of OPS is that it does not require any employee contributions, and the pension is guaranteed. To qualify, employees must complete a minimum of ten years of service. Additionally, the income received under this scheme is tax-free.

National Pension System (NPS)

The National Pension System, also known as the new pension scheme was also introduced by the Government of India but unlike OPS, NPS is available to both government and private sector employees. Under this system, subscribers need to contribute regularly to receive benefits in post-retirement years. The NPS offers market-linked returns as it invests in a diverse range of asset classes such as equities, bonds, securities, and AIFs.

An NPS subscriber can choose their asset allocation as their risk appetite and financial goals. Upon retirement, 60% of the accumulated corpus is tax-free, while the remaining 40% must be used to buy annuities to receive a regular pension. Any Indian citizen between the ages of 18 and 70 can invest in NPS. Moreover, the change in job or location doesn’t impact their potential returns.

One of the benefits of NPS is its flexibility. Subscribers can choose their asset allocation, potentially earning higher returns. Upon maturity, 60% of the accumulated corpus is tax-free, while the remaining 40% must be invested in annuities, which are 100% taxable.

What are the 5 tax benefits under the new pension scheme? Interested? Read them here.

Key Differences Between OPS and NPS

Feature            Old Pension Scheme (OPS)New Pension Scheme (NPS) 
ReturnsFixed returns based on the last drawn salary.Market-linked returns.
Tax-Benefits Tax-free60% of the accumulated corpus is tax-free, and the rest 40% is taxable.
EligibilityIt is only available for government employees.NPS is open to every citizen of India aged 18-70.
ContributionsEmployees don’t need to contribute. It is government-funded.Employees and employers can both contribute to NPS.
FlexibilityFixed monthly pension with no investment preferences.Investment preferences are available for better potential returns.
InvestmentYou cannot decide your contribution amount. It is fixed by the Government of India.In NPS, subscribers have the leverage to choose their investment amount.

Final Thoughts

Both retirement schemes have their own set of benefits, but OPS is only available to government employees; however, it is only available to those employees who have joined on or before January 1, 2004. On the other hand, NPS is available to everyone as it comes with more flexibility and the potential for high returns. Individuals should assess their risk tolerance, investment horizon, and financial goals before choosing any pension plan or scheme.

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National Pension Yojana – A Retirement Plan For All!

March 30, 2025

The National Pension Yojana, widely known as the National Pension System, is a government-sponsored pension scheme for Indian citizens who look to safeguard their golden years. It was launched in 2004 and opened for only government employees. But in 2009, the National Pension Yojana opened to every Indian citizen between the age of 18-70 years.

NPS is an attractive long-term investment option for salaried and self-employed individuals. In this blog, we’ll discover how NPS is the go-to retirement for many individuals in India. Let’s have a look at the NPS features and why it can be a preferable choice for every individual.

Key Features of NPS

  1. Eligibility: Any Indian citizen between 18 and 70 can enroll in NPS.
  2. Returns Potential: NPS invests in a mix of asset classes such as equities, bonds, and securities. It diversifies your investment and potentially provides you with market-linked returns.
  3. Type of Accounts: NPS has two accounts, Tier I and Tier II. Tier I is a pension account to which a subscriber regularly contributes. On the other hand, Tier II is a voluntary savings account with flexible withdrawals options.
  4. Easy to Understand Structure: NPS simply invests in an array of asset classes. To make things easy and transparent, the NPS calculator gives subscribers the potential of returns on their investment over a while, depending on their contribution and market.
  5. Low Investment: The National Pension Yojana is a low-investment affair. A subscriber can open an NPS account with ₹500 only and start planning for their golden years.

Why is NPS the best choice for everyone?

  1. Market-Linked Returns: NPS offers the potential for higher returns compared to traditional fixed deposits or provident funds. Since the investment is diversified into equity, bonds, and government securities, it provides a balanced approach to wealth creation.
  2. Low-Cost Structure: In contrast to most other investment products, NPS comes with a very low expense ratio, ensuring that a significant portion of your funds remain invested and grows with time.
  3. Flexible Approach: Subscribers have the freedom to contribute as per their financial capacity. Moreover, they can choose auto or active mode where they have the advantage of choosing their approach. Aggressive subscribers can opt for active mode, and moderate subscribers can choose auto mode. This is based on their risk appetite and investment horizon.
  4. Tax Benefits: One of the key benefits of NPS is that it comes with numerous tax advantages. Under the Income Tax Section 80 (C), a subscriber can have up to ₹1.5 lakh tax benefits and an additional deduction of ₹50,000 under Section 80CCD(1B), which is over and above 80 (C).
  5. Portability: The NPS account remains active regardless of job changes or location shifts. This makes it a perfect retirement tool for individuals who switch jobs frequently or migrate to different cities.

What are the 10 compelling reasons to plan retirement with NPS? Do you want to explore more? Click here. 

How to enroll in the National Pension Yojana?

  1. Visit nps.kfintech.com to open your NPS account.
  2. Submit KYC documents (Aadhaar, PAN, etc.). 
  3. Choose your investment strategy and pension fund manager.
  4. Make the initial contribution to activate the account.

Final Thoughts

The National Pension Scheme is an ideal retirement planning tool, offering financial stability and disciplined savings. With its tax benefits, flexibility, and long-term growth potential, NPS is a must-consider option for individuals seeking a secure post-retirement life.

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National Pension System: A Smart Retirement Planning Option For Indians

March 28, 2025

Retirement planning is one of the most important financial choices you may make. With rising financial uncertainties, having a well-structured retirement plan is important to safeguard the future in your golden years. One of the best ways to achieve this is through a national retirement scheme such as the National Pension System.

How NPS can be a smart retirement planning option for you, we’ll explore in this blog.

National Pension System: Understanding and Overview

The National Pension System (NPS) is a government-backed retirement savings scheme that provides long-term financial security. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), which oversees its transparency. NPS is available to every Indian citizen between 18 and 70.

In this national retirement scheme, individuals contribute consistently to their pension funds, and upon retirement, they can get up to 60% of their accumulated corpus, and the remaining 40% is used to buy annuities to receive regular pensions. This way, people have sound financial stability in their post-retirement years.

Are you looking to save more on taxes? Read here to know more.

Advantages of the National Pension System

  • Tax Benefits: NPS contributions are tax-deductible under Sections 80CCD(1), 80CCD(2), and 80CCD(1B) of the Income Tax Act, making it a tax-effective retirement planning investment.
  • Market-Linked Returns: NPS invests in equities, corporate bonds, government securities, and AIFs, enabling market-linked returns.
  • Flexible Contributions: Investors can choose how much they want to contribute depending on their financial objectives and retirement planning.
  • Regulated and Secure: Being a government-regulated scheme, NPS provides transparency and security to investors.
  • Annuity for Lifetime: Upon maturity, 40% of the accumulated corpus is utilized to purchase an annuity, providing regular income in retirement in the form of pension.

Why is NPS important for Retirement Planning?

NPS is an organized retirement planning plan that provides you with financial security and independence in your golden years. The National Pension System encourages disciplined savings with tax benefits, flexible choices, and long-term economic stability. NPS can be the perfect option for those working professionals who are looking to secure their future.

With rising inflation and healthcare expenditures, traditional savings cannot meet your expectations to counter them. Here NPS fills the gap by providing a systematic plan that can grow over time and provide you the benefit you need the most—in your post-retirement years.  

One of the biggest advantages of the NPS is its cost-effectiveness. Compared to other pension products, the NPS comes with lower charges for fund management, which means that more of your money will be invested in increasing your retirement corpus. This makes it a great choice for those who want to save as much as possible while incurring minimal expenses.

Final Thoughts

NPS is a great retirement planning tool with growth potential and financial security. By contributing to NPS consistently during your working life, you can look forward to a secure and peaceful retirement. If you are searching for a structured, government-guaranteed, and tax-effective pension scheme, NPS is a viable option to plan for a financially secure life.

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How to Save Tax with NPS? Explained in this blog.

February 28, 2025

The National Pension System (NPS) has rapidly become a popular choice among individuals due to its flexibility and cost-effectiveness. Many individuals invest in NPS for tax-saving benefits.  As you prepare for retirement, NPS provides an opportunity to shield your hard-earned income from taxes. With NPS tax-saving scheme advantages it becomes an adaptable investment option in which investors minimize their tax liabilities while accumulating a robust retirement fund. So, how can NPS save tax and what are its features, we’ll unveil in this blog.

National Pension System: An Outline

NPS is a voluntary retirement savings and investment scheme available to both salaried employees and self-employed individuals. The Pension Fund Regulatory and Development Authority (PFRDA), oversees the regulation of NPS. It is a market-linked pension plan managed by professional fund managers.

Tax-saving Under NPS

There are two types of NPS accounts: Tier 1 and Tier 2. While Tier 2 accounts do not offer any tax deductions or benefits, contributions to a Tier 1 account are eligible for tax-saving deductions.

  • Tax-saving While Investing
  1. Section 80C: You can claim NPS tax benefits under this section, with a deduction limit of ₹1.5 lakhs. If you want to take advantage of the tax benefits, you can invest the entire amount in NPS and deduct it.
  2. Section 80CCD (1B): This section offers an additional tax benefit exclusive to NPS subscribers. Investors can claim an extra deduction of up to ₹50,000 for contributions to their Tier I account, which is in addition to the ₹1.5 lakh limit under Section 80C.
  3. Section 80CCD (2): If you opt for a corporate NPS contribution, you can deduct up to ₹5.5 lakh from your taxes, or up to 10% of your basic salary. This benefit is also exclusive to NPS and is in addition to the ₹1.5 lakh limit under Section 80C.
  • Tax Benefits of Partial NPS Withdrawal

NPS tier 1 accounts permit up to three partial withdrawals of the account balance during the investment period, subject to specific terms and conditions. According to Section 10(12B) of the Income Tax Act, these partial withdrawals are tax-free, provided they do not exceed 25% of the subscriber’s self-contribution.

  • Tax Benefit when Purchasing Annuities in Retirement

Under Section 80 CCD (5) of the Income Tax Act, 60% of the accumulated corpus is exempt from taxes. To purchase annuities at superannuation, a minimum of 40% of the NPS Tier 1 account balance must be utilized, and the income received from these annuities is taxable according to the applicable income tax slab rate.

Are you wondering what are the objectives and features of NPS? Read it here.

Final Thoughts

The National Pension System (NPS) offers various tax benefits, making it a vital investment tool for tax savings while planning for retirement. It offers more tax-saving options than traditional savings options like FDs and PPFs. Up to 60% of your accumulated corpus is tax-free and potential for high returns, making it a popular choice for investors.

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NPS Scheme Benefits: An Attractive Option for Retirement Planning

The National Pension System also known as National Pension Scheme (NPS), launched by the Government of India, is a robust pension plan aimed at providing financial security to citizens during their retirement years. This scheme is accessible to all Indian citizens aged 18 to 70, making it a flexible option for anyone looking to ensure their financial stability. With numerous benefits, the NPS stands out as an appealing tool for retirement planning. 

NPS comes with various benefits and in this blog, we’ll explore them.

National Pension Scheme Benefits: Why should you consider it?

  • Lucrative Tax Benefits: One of the most attractive features of the NPS scheme is the tax benefits it provides. Contributions made to the NPS are eligible for tax deductions under Section 80C of the Income Tax Act, allowing you to save up to ₹1.5 lakh each year. Additionally, there is an extra deduction of ₹50,000 available under Section 80CCD(1B). This makes the NPS a powerful option for lowering your taxable income while simultaneously building your retirement fund. 
  • Diverse Investment Option: The NPS scheme offers an array of investment opportunities. As a subscriber, you can distribute your funds across various asset classes, including equity, corporate bonds, government securities, and alternative investment funds (AIFs). This flexibility allows you to customize your investment portfolio based on your risk tolerance, retirement objectives, and investment horizon.
  • Potential for High Returns: A key reason many individuals choose to invest in the National Pension System is its potential for high market-linked returns. The NPS generally provides higher returns compared to traditional savings options like PPFs and fixed deposits, as it invests in equities and other growth-oriented instruments. This makes it a valuable investment choice.

To estimate the potential growth of your NPS contribution, you can use the NPS calculator. How can the NPS calculator benefit you, read this blog. Click here to learn. 

  • Long-term Financial Security: One of the key advantages of the NPS scheme is the long-term financial security it offers. By consistently contributing to the NPS, you can accumulate a substantial retirement fund. This brings peace of mind, knowing you have a financial safety net when you decide to stop working.
  • Low-Cost Investment Option: Another appealing aspect of the National Pension Scheme is its cost-effectiveness. To open an NPS account, you only need to make a minimal initial contribution of ₹500, and the annual investment requirement is just ₹1000. This makes NPS a great choice for anyone looking to start their retirement savings.
  • Withdrawal and Annuity Options: When you retire, NPS subscribers have the option to withdraw up to 60% of their total corpus as a lump sum. The remaining 40% is required to be used for purchasing an annuity, which ensures a steady and regular income throughout retirement. This structure helps guarantee that you remain financially secure in your later years.

Final Thoughts

The National Pension Scheme provides numerous advantages, making it an excellent option for anyone aiming to establish long-term financial stability. With benefits like tax efficiency and flexible investment choices, the scheme is crafted to help you save for retirement smartly and cost-effectively.

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Understanding the National Pension System (NPS) Details

February 27, 2025

The National Pension System (NPS) is a government-backed retirement savings scheme designed to provide financial security post-retirement. It offers individuals a structured way to invest systematically while benefiting from tax advantages and market-linked returns. 

With its flexible investment options, regulated framework, and long-term wealth creation potential, NPS has become a preferred choice for those planning a secure retirement. Understanding its features, benefits, and withdrawal rules is crucial for making informed financial decisions. So, if you are looking to know more about the NPS pension scheme details, we’ll cover them in this blog.

NPS Scheme Details

Eligibility: NPS is open to all Indian citizens, including both salaried and self-employed individuals. You can join NPS between the ages of 18 and 70.

Account Types:

  1. Tier I Account: This is the primary retirement savings account. Contributions to Tier I are tax-deductible under Sections 80C and 80CCD of the Income Tax Act. Funds in this account are locked until the age of 60, with certain exceptions like premature withdrawal under specific circumstances.
  2. Tier II Account: This is a voluntary savings account. You can withdraw money from this account at any time. However, it does not offer the same level of tax benefits as the Tier I account.

Contribution: The minimum contribution for Tier I is ₹1000 annually. There is no minimum contribution defined for Tier II accounts. Contributions can be made through various modes such as online transfers, banks, or even through cheques.

Investment: NPS provides you with various asset classes for investments including equities, corporate bonds, government securities, and AIFs. You can choose your asset allocation or opt for the default choice where the asset allocation changes with age.

Returns: NPS returns are market-linked, thus depending on the performance of the underlying asset classes. The return is generally higher than traditional government-backed instruments like PPF or FD due to exposure to equities and corporate bonds.

Withdrawal: At the time of retirement, age 60 years or later, you can withdraw up to 60% of the corpus tax-free. The remaining 40% has to be used to buy an annuity that will give you a regular monthly income.

Tax Benefits:  Contributions to Tier I are eligible for tax benefits up to ₹1.5 lakh under Section 80C, over and above ₹50,000 of Section 80CCD (1B) which also goes beyond the ₹1.5 lakh limit. The corpus created in the NPS is also completely exempt from tax on capital gains, thereby making a tax-efficient retirement investment.

How can NPS Vatsalya help you build a strong future for your child? Read it here.

Final Thoughts

If you are looking to secure your retirement financially, the National Pension System (NPS) can be a great option. With NPS, individuals can save on taxes while working and withdraw up to 60% of the accumulated corpus tax-free after retirement – offering dual benefits. However, it is advisable to consult a financial advisor before starting your NPS journey.

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NPS Vatsalya – Building a Strong Financial Future for Your Child

January 29, 2025

In 2024, the Government of India introduced the NPS Vatsalya Scheme for Indian citizens who are below 18 years old. This scheme allows parents to contribute a specific amount on behalf of their children to secure their future and help them develop a retirement fund. In this blog, we’ll explore more about the this scheme.

NPS Vatsalya Scheme – An overview

The Pension Fund Regulatory and Development Authority of India (PFRDA) administers this scheme. The NPS Vatsalya scheme is a new variant of the existing National Pension System, designed specifically for young individuals below 18 years of age. Its primary objective is to cultivate a habit of retirement savings and promote long-term financial security from an early stage in life. Guardians or parents can open NPS Vatsalya accounts on behalf of their children and contribute towards their retirement savings. Under this scheme, parents or guardians will act as nominees, while the child will be the sole beneficiary.

Features of the NPS Vatsalya Scheme

  • Develop an Early Investing Habit: This Scheme allows parents or guardians to open an account for their minor children, making them the sole beneficiaries. The account will be managed by the guardian exclusively for the child’s benefit until the child turns 18. Upon reaching 18 years of age, the account will be transferred to the child’s name, allowing them to continue managing it with the accumulated corpus.
  • Transfer of Funds: Once the minor turns 18, the account will remain active and will be transitioned into an NPS Tier-1 Account under the All Citizen Model, or can be moved to another non-NPS scheme account. The Central Recordkeeping Agency (CRA) will issue a unique Pension Retirement Account Number (PRAN) in the child’s name.
  • Low Investment Amount: The minimum annual contribution to this Scheme is Rs. 1,000, with no upper limit on the maximum contribution. The initial enrollment contribution is also Rs. 1,000. The scheme provides options for partial withdrawals and account exit.

Click here to know how retirement planning and NPS are related to each other.

Who is Eligible for the NPS Vatsalya?

  1. Any Indian citizen who is below 18 years of age.
  2. NRIs and OCI individuals below 18 years of age.
  3. Parents or guardians can open and operate the account on behalf of the minor.

Final Thoughts

The NPS Vatsalya scheme is an excellent initiative to promote financial security and encourage early retirement savings for children. By allowing parents or guardians to open an NPS Vatsalya account on behalf of their children, this scheme provides a head start in building a strong retirement corpus from a young age. With its low minimum contribution requirement, flexible withdrawal options, and seamless transition when the child turns 18, NPS Vatsalya serves as a valuable tool for ensuring financial stability in the future. Beyond fostering early investment habits, it also plays a crucial role in securing long-term financial well-being.

Open an NPS Vatsalya account today!

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Get NPS Tax Benefits Today and Safeguard Your Future Tomorrow! 

January 28, 2025

Planning for the future is an important step toward ensuring a secure and comfortable retirement. The National Pension System (NPS), introduced by the Government of India is a comprehensive scheme designed to help individuals achieve financial stability in their later years. Beyond its role in building a retirement corpus, NPS also offers attractive tax benefits. In this blog, we will explore how NPS can help you save on taxes today while providing peace of mind for the future.

Benefits of NPS

Let’s have a look at the NPS features briefly before discussing the NPS tax saving scheme benefits:

  1. Regulated: The National Pension System is regulated by the Pension Fund Regulatory and Development Authority which maintains the transparency of the scheme.
  2. Portable: NPS is a portable retirement and tax-saving scheme. It means a subscriber doesn’t need to make changes in the scheme if his job, location, area, or city changes.
  3. Low Investment: Any subscriber in India can open an NPS Tier I account with a mere ₹500. This makes it an attractive option among all the other traditional retirement plans.
  4. Potential of Returns: NPS invests in a diverse range of asset classes such as equities, corporate bonds, government securities, and AIFs. Thus, it has the potential to provide higher returns in the long term.
  5. Flexible: NPS gives a subscriber to choose between auto and active mode. This means depending on their risk profiles, financial goals, and investment horizon they can change their approach from aggressive to moderate to conservative in active mode.

National Pension System – Eligibility

  1. Any Indian citizen between the ages of 18 and 70 can open an NPS account.
  2. A subscriber should have an active bank account.
  3. A subscriber needs to have the necessary documents such as a PAN card, Aadhar Card, and bank details to open an NPS account.

National Pension System – Tax Benefits

  • NPS Tax Benefit on Self-Contribution: Salaried individuals can claim up to ₹1.5 tax benefit under Section 80 (C) of the Income Tax Act. Additionally, they can have ₹50,000 tax benefits under Section 80 CCD (1B) which is over and above Section 80 (C).
  • NPS Tax Benefit on Employer Contribution: The employer’s contribution to an employee’s NPS is eligible for a tax deduction of up to 10% of the salary (basic plus DA), or 14% of the salary.
  • NPS Tax Benefit on Partial Withdrawal:  Up to 25% of the self-contribution amount is eligible for tax exemption for partial withdrawals. However, this is subject to the circumstances and criteria given by the PFRDA.  
  • NPS Tax Benefit on Upon Retirement: Up to 60% of your accumulated corpus is exempt from tax and comes under EEE (Exempt, Exempt, Exempt), and the remaining 40% should be used to buy annuities to receive the taxable pension.

Final Thoughts

The National Pension System comes with various tax benefits while you invest today and it also safeguards your golden years. It can be a great choice for individuals looking to secure their financial future knowing that their money is invested and regulated by the Government of India.

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Retirement planning and the National Pension System (NPS) – How are they related?

December 26, 2024

Retirement planning is an important factor in today’s world. People are busy in their day-to-day lives to earn money and grow their wealth. People who work hard today look for a retirement plan to secure their golden years. One powerful tool that can help you with retirement planning is the National Pension System, also known as the National Pension Scheme. In this blog, we’ll explore the importance of retirement planning and how NPS can assist you in securing your retirement years.

Retirement Planning—Why Is It Important?

Retirement planning is an approach to preparing for your future financially. The main aim is to ensure that you can maintain the same lifestyle and achieve your goals after retirement. Here are a few reasons why retirement planning is important:

  1. Inflation: The cost of living is going to rise, and your retirement savings have to be at par with the inflation rate at least, if not above. Without proper planning, your retirement fund may not be enough to live a better life.
  2. Dependency: Without financial planning, you may depend on your family members, and it may put a strain on them.
  3. Maintaining the Lifestyle: Retirement doesn’t have to mean cutting down your lifestyle or your financial goals. People have hobbies, passions, and dreams that they want to pursue after retirement. Proper retirement planning helps them to deal with the financial stress.

How can NPS help in your retirement planning?

The National Pension System is a government-sponsored retirement scheme designed to provide financial security. It can be an effective tool for retirement planning because of its features, such as flexibility, long-term growth, low investment cost, and tax benefits. Let’s dive into how NPS can play an important role in your retirement strategy:

  1. Long-term Growth Potential: NPS invests in a mix of asset classes such as equities, government bonds, corporate securities, and AIFs. If you start early and invest regularly, you can have the benefit of compounding. This can help your investment grow over time. Your small contribution today can turn into a huge financial corpus.
  2. Tax Benefits: NPS doesn’t only offer retirement planning, but it also comes with numerous tax benefits that can help you save your money today. Contributions to NPS are eligible for a tax deduction up to ₹1.5 lakh under Section 80 (C) of the Income Tax Act. Moreover, you can claim an additional tax benefit of up to ₹50,000 under Section 80CCD (1B). This makes NPS one of the most tax-efficient retirement planning tools available in the market.
  3. Flexible Contribution: NPS gives you the flexibility to contribute as per your choice and budget. Whether you are just starting or near retirement, you can adjust your contributions based on your financial situation.
  4. Low-cost Investment: This is one of the key features of NPS. Any Indian citizen between the ages of 18 and 70 can open an NPS Tier I account with ₹500 only.
  5. Retirement Withdrawal: Upon retirement, an NPS subscriber can withdraw up to 60% of the accumulated corpus, while the remaining 40% must be used to buy an annuity that provides a regular pension.
  6. Portability: When you change your job or location, your NPS account remains active. NPS is portable, which means you don’t start from the beginning every time you change your job or location.

How to open an NPS account? What are the factors you should consider? Click here to know. 

Final Thoughts

Retirement may seem far away today, but the earlier you start planning, the more you’ll benefit in the long term. With NPS you can start retirement planning and take advantage of its features such as flexibility, tax efficiency, market-linked returns, and low-cost investment. These can be viable factors to help you build a solid retirement corpus. 

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What are the objectives and features of the National Pension System? Explained in this blog.

December 24, 2024

The National Pension System was initiated by the Government of India to financially secure the lives of Indian citizens after retirement in 2004. The NPS pension scheme seeks to promote a habit of saving for your golden years. In this blog, we’ll discover the details of the NPS scheme, its benefits, and its objectives.

What is the National Pension System (NPS)?

NPS is also known as the National Pension Scheme, and it is a voluntary contribution scheme that promotes the habit of saving for retirement years. NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) under the PFRDA Act 2013. NPS invests in equities, corporate bonds, government securities, and AIFs. Professional fund managers invest the collected money from individuals into diversified portfolios. Any Indian citizen between the ages of 18 and 70 years can invest in NPS.

What are the objectives of NPS?

Let’s have a look at the objectives of the National Pension System.

  1. To provide financial security by creating a substantial corpus for the subscriber’s retirement phase.
  2. To provide a hassle-free retirement life where a subscriber doesn’t need to worry about their financial aspects.
  3. To provide a reliable retirement scheme where youth can invest and plan for their retirement.
  4. To address the senior citizen demography within the country.
  5. To promote systematic habits of saving and planning for golden years. Subscribers can invest in NPS while they work.

What are the features of NPS?

The National Pension System comes with many features and advantages. It is a regulated, flexible, and low-investment scheme. Let’s unveil its features.

  1. Regulated: NPS is regulated by PFRDA, which oversees the transparency and interest of its subscribers.
  2. Cost-effective Investment: This is one of NPS’s key benefits. Any subscriber can open a Tier I account with ₹500 only.
  3. Tax Benefits: NPS doesn’t only allow you to invest and plan for your golden years, but it also comes with various tax benefits. A subscriber can get up to ₹1.5 lakh tax deduction under Income Tax Section 80 (C). Moreover, there is an additional tax deduction of ₹50,000 under the Income Tax Section 80CCD 1(B). This is over and above ₹1.5 lakh. This makes a total of ₹2 lakh tax deductions under NPS.
  4. Flexible: NPS offers to invest in auto and active modes. This means a subscriber can choose between aggressive, moderate, and conservative modes, depending on the subscriber’s risk appetite and investment horizon.
  5. Professional Management: NPS investments are managed by professional fund managers. They have years of experience and expertise to manage your assets.
  6. Portable: NPS offers portability too. This means an individual’s job or location change doesn’t affect their contributions and returns.
  7. Market-linked Returns: NPS has the potential to provide you with market-linked returns. It invests in equities, corporate bonds, government securities, and AIFs. It can potentially generate more returns than traditional savings options such as PPFs and FDs.
  8. Pension Security: NPS provides pension security to its subscribers. You can withdraw up to 60% of your financial corpus upon retirement, which is tax-free, and the remaining 40% is used to buy annuities to receive a regular pension.

Looking to learn more about NPS tax benefits? Explained in this blog. Click here.

Final Thoughts

NPS offers many benefits and provides a financial cushion for your golden years. Should you invest in NPS? Yes, it offers tax benefits, long-term savings, and market-linked returns, making it a good retirement option. However, it is advisable to consider your retirement goals, investment horizon, and risk appetite before you start your journey with NPS.

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