Topic: NPS

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Why is NPS the best investment plan for senior citizens? Find out!

May 19, 2025

Retirement planning is becoming increasingly popular among Indian citizens. A reliable pension plan ensures that senior citizens receive steady income deposits in their accounts to cover daily expenses. In this context, the National Pension System (NPS) is regarded as one of the best investment options for senior citizens. This plan offers subscribers a pension scheme that helps maintain financial stability during their golden years.

Introduced by the Government of India, the NPS aims to provide a financial cushion for retirees post-retirement. In this blog, we will explain how the NPS serves as the best investment plan for senior citizens and why it should be chosen.

How does the NPS facilitate a comfortable retirement? Let’s explore.

The NPS is considered one of the top investment plans for senior citizens because it guarantees both stability and growth. Retirees benefit from market-linked returns while ensuring a dependable monthly pension. Upon reaching the age of 60, you can withdraw up to 60% as a lump sum, while the remaining 40% must be used to purchase annuities for a regular pension after retirement. 

Here are 7 reasons why the NPS stands out as the best investment plan for senior citizens:

  1. Regulated: The NPS is overseen by the Pension Fund Regulatory and Development Authority (PFRDA), ensuring that your investments remain safe.
  2. Accessible to everyone: This affordable investment plan allows you to start investing with as little as ₹500.
  3. Tax Benefits: The NPS provides tax benefits up to ₹1.5 lakh under Section 80(C) and ₹50,000 under Section 80CCD (1B), which is in addition to Section 80(C).
  4. Diversification: Unlike traditional investment options, the NPS helps you diversify your portfolio across equity, corporate bonds, government securities, and alternative investment funds (AIFs).
  5. Better than traditional retirement plans: Being equity-linked, investment in NPS have a higher return potential compared to fixed deposits (FDs) and Public Provident Funds (PPFs), which is a significant reason for its preference among senior citizens.
  6. Flexible: The NPS provides subscribers with the option to choose their investment strategy. They can select between auto and active modes and choose fund managers based on their investment goals and time horizons.
  7. Portable: This is a key feature of the National Pension System, allowing subscribers to maintain their contributions regardless of changes in location or job, ensuring unaffected returns.

Click here to learn how NPS is an attractive retirement plan for every citizen of India.  

Final Thoughts

The National Pension System is a prominent retirement plan for both senior citizens and younger individuals. As mentioned above, any citizen of India between the ages of 18 and 70 can invest in it, making the NPS an attractive retirement saving option. If you are seeking the best saving scheme for senior citizens, the NPS is a structured and government-backed plan that ensures long-term financial security. However, it is advisable to consult a financial advisor before starting your journey. 

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Is the National Pension System becoming the best annuity plan in India? Learn why? 

May 16, 2025

A retirement plan should provide peace of mind in your golden years. Individuals seek to receive a pension after retirement; in this regard, the National Pension System (NPS) is considered one of the best annuity plans in India. Initially introduced for government employees, the NPS was later opened to every Indian citizen. Subscribers can withdraw up to 60% of their retirement corpus, while the remaining 40% must be used to purchase annuities for a regular pension. So, what are the benefits of the best annuity scheme in India? We will explore this in the blog.

NPS – A Brief Introduction 

The National Pension System is a voluntary retirement savings plan designed to help individuals financially safeguard their futures. It is a market-linked scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The primary purpose of the NPS is to create a corpus that generates income after retirement. Any Indian citizen aged between 18 and 70 can open an NPS account. Additionally, it offers tax deductions under Sections 80(C) and 80(1B) of the Income Tax Act.

NPS Annuity – Explained 

Upon retirement, NPS subscribers can withdraw 60% of the total corpus, while the remaining 40% must be used to purchase an annuity plan from a Registered Annuity Service Provider (ASP), which is empanelled by the PFRDA and deemed reliable for reinvesting your money. An annuity also pays a fixed amount to the subscriber and their spouse upon the subscriber’s death.

Why is NPS the Best Annuity Plan? 

The annuity policy of the NPS protects a subscriber’s hard-earned money and provides a steady income during old age. Here are a few key features of the NPS annuity plan:

  1. Flexibility to choose: The minimum amount to buy annuities is 40% of the retirement corpus; however, NPS subscribers can opt for a higher amount if they prefer a lower lump sum withdrawal and a significantly higher regular pension.
  2. Withdrawal before the age of 60: Withdrawals can only occur after turning 60 to access 60% of the accumulated corpus. If you wish to exit before 60, only 20% can be withdrawn as a lump sum, while the remaining 80% will be reinvested into an annuity.
  3. Annuity options: Multiple annuity plans are available in India, including options for lifetime payouts to the subscriber, lifetime payouts with continued income to a spouse after the subscriber’s death, and several customizable variations.

Click here to learn how NPS is an attractive option for retirement planning. 

Annuity Policy in NPS – Benefits  

  • Reinvestment Benefit: A fixed 40% of your retirement corpus is reinvested to provide lifelong annuity payments, potentially increasing in value over time. 
  • Financial Safety: Annuities ensure a steady income in retirement and protection against financial turmoil.
  • No Investment Cap: NPS annuity schemes have no upper investment limit, distinguishing them from other pension tools. 
  • Partial Withdrawal Option: Subscribers can withdraw up to 25% after three years for specific needs such as marriage, home purchases, or medical expenses.

Final Thoughts 

The NPS in India can be regarded as the best annuity plan due to its numerous benefits. Features like the absence of an upper investment cap, flexibility in choosing options, and continued income for a spouse are crucial factors that make the National Pension System a favourable choice for individuals. 

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5 Reasons why NPS is the best retirement plan in India? 

May 14, 2025

Retirement is inevitable for every employee. They start looking for better retirement plans to have a financially secure future. Here, NPS can play a vital role in giving them a piece of mind during their golden years. So, if you are wondering, why choose NPS as your pension plan in India? Then, read this blog till the end.  

National Pension System —An Introduction

The National Pension System, also known as the National Pension Scheme in India, was introduced by the Government of India in 2004. Earlier, it was only meant for public sector employees, but later it was available for every citizen of India, except for people working in the armed forces. It comes with various features; let’s have a look at them first.

 National Pension System—Features

  • Voluntary: NPS is a voluntary investment plan. It allows you to choose how much you would want to invest as per your retirement plans.
  • Diversification: NPS invests in a range of asset classes, such as equity, corporate bonds, government securities, and AIFs.
  • PFRDA Regulated: The Pension Fund Regulatory and Development Authority regulates the NPS, ensuring transparency of your investments and potential returns.
  • Tax Benefits: NPS comes with certain tax benefits under Section 80 (C) and 80 CCD (1B) of up to ₹1.5 lakhs and ₹50,000, respectively. A subscriber can get both of the benefits.

NPS Scheme – Why Choose it for Retirement Planning?

 NPS offers several benefits that make it an ideal choice for retirement savings. Here are the top reasons to include NPS in your retirement planning:

  1. Tax Benefits: The most attractive reason to invest in NPS is its tax benefits. As per Section 80C of the Income Tax Act, you are eligible to claim deductions of up to ₹1.5 lakhs on your investment in the Tier-1 account. There is an additional deduction of ₹50,000 under Section 80CCD. All these tax benefits make your taxable income lower, and you pay less tax in the long term.
  2. Control Over Investments: NPS offers you the flexibility to choose how your contributions are invested. You have the flexibility to invest across asset classes of equities, government securities, corporate bonds, and alternative funds of investment. You can structure your portfolio as per your risk appetite and investment objectives and thus be able to maximise returns while managing risks.
  3. Regulated: The NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), a government body that ensures the safety and growth of your investments. This makes NPS a trustworthy option among other retirement plans.
  4. Low-Cost Plan: NPS has low management charges, which are between 0.03% to 0.09%. Lower charges mean that a larger portion of your contribution is invested towards your retirement corpus. Eventually, helping you create potential wealth
  5. Flexible and Portable: NPS provides great flexibility when it comes to withdrawals. You can withdraw partially in case of emergencies like medical bills, education fees, or buying a house. Also, the portability option enables you to operate your NPS account from anywhere in India, so your retirement savings are always available whenever and wherever you require them.

 Are you looking to save taxes while investing in NPS? How much can you save? Click here to learn. 

Final Thoughts

NPS is one of the best retirement plans in India, as it not only offers tax benefits but also enables you to build a retirement corpus over time, providing a regular pension after retirement. Additionally, it is advisable to consult a professional financial expert before embarking on your journey. 

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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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