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When someone visits a nutritionist, he advises him to increase carbohydrates, protein, and iron in his diet. Next question that comes to the patient’s mind is, “What will be the benefits?” Or in a different scenario, when you are looking to buy something for your home apart from aesthetically nice, other things may come to your mind, how it will benefit you or what is the purpose of the particular product.
And when you plan for your future, you look for investment options and its benefits. You look for a good investment plan to secure your future financially. Now, if you are looking to invest in the National Pension System, also known as the National Pension Scheme, you tend to look for benefits. We make this easy for you as this blog will cater NPS (National Pension System) benefits in a brief to save you from intense research. But first let’s understand the NPS Scheme briefly.
What is National Pension System?
The Government of India launched NPS a low-cost retirement solution, started in 2004, and in 2009 the government made it available for all the citizens of India. It is governed by the Pension Fund Regulatory and Development Authority (PFRDA).
NPS encourages people to put money into a pension account at regular times while they are working. Subscribers can take out a certain amount of the corpus when they retire. If you have an NPS account, you will get the rest of the money as a monthly pension when you retire.
What are the benefits of NPS?
If you are wondering why you should invest in the NPS scheme, here’s your list of NPS benefits. NPS is a low-cost pension and investment product among the many NPS scheme benefits. Besides being effective for retirement planning, it is a key tool offering secure long-term returns and considerable income post-retirement. It is also a tax-efficient instrument. These features make it an ideal investment vehicle for diversifying your portfolio.
- Flexibility: Investors in the NPS can choose from 7 different fund managers to be in charge of their money. The mode (Active or Auto mode) can also be chosen. They can manage their account from anywhere in India.
- Liquidity: After 60 years, 60% of the total can be taken out, and the rest can be put into any annuity plan. We can also take up to 25% of the amount out in case of an emergency after paying for 3 years.
- Diversification: NPS lets you choose from a small number of asset classes, such as stocks, bonds, government securities, and alternative funds. This reduces the risk.
- Tax-benefits: The NPS scheme enables a tax benefit of up to 2 Lakhs. The tax benefits in the NPS scheme are under three provisions. They are 80CCD(1), 80CCD(1B) and 80CCD(2). On retirement, every individual will receive a tax-free lump sum withdrawal of up to 60% of the total.
- Low-cost Investment: In the National Pension Scheme, subscribers can contribute a minimum of ₹1000/- every financial year and the minimum contribution required to open an NPS account is ₹500/-.
The NPS Scheme can be made online which makes this retirement scheme a hassle-free affair. You can open an NPS account with KFin Technologies.
Conclusion
It is always better to know the benefits of any investment scheme before you plunge into the investment world. But when you know that its benefits align with your financial goals, it is recommended to start investing. Connect with a financial advisor or do your own research before investing in the NPS Scheme.
