What is the NPS Scheme and What are its Benefits?
NPS is a National Pension Scheme which is a retirement benefit offered by the government of India. This helps to get regular income after retirement which is not possible otherwise. Also, NPS is governed by the Pension Fund Regulatory and Development Authority. People apply to these schemes because of the benefits they offer to retired investors. This article discusses what is NPS scheme and what are its benefits.
What is the NPS Scheme?
NPS stands for National Pension Scheme which is a voluntary and long-term investment plan for retirement. It is a social security initiative started by the central government. This scheme can be availed by employees from all sectors ranging from public, private, organised and unorganised sectors. One can invest in a pension account at regular intervals through this.
Benefits of National Pension Scheme
NPS is based on a unique permanent retirement account number which is allotted to every subscriber. This is usually done to encourage savings. The scheme offers various benefits which are mentioned below for your reference.
Flexibility
In NPS, one has the flexibility to select or change the point of presence, investment pattern and fund manager. This helps one to optimise returns as per their comfort with various asset classes and fund managers.
Regulated
The regulation of NPS is done by the Pension Fund Regulatory and Development Authority. It offers transparent investment norms, regular performance reviews and monitoring of fund managers by NPS trust.
Tax Benefits
Both salaried and self-employed individuals can claim tax exemption up to Rs. 50000 under section 80 CCD (1B). This benefit is over and above the limit of Rs.1,50,000 under section 80 C. A salaried person can invest up to 10% of their basic salary and dearness allowance and claim tax exemption on the invested amount and self-employed can invest up to 20%.
Super Annuation Fund Transfer
National Pension Scheme holders can transfer their superannuation funds to their NPS account without any tax implication. This can only be done after approval from relevant authorities.
Risk Assessment
NPS offers rules regarding how much money can be invested in stocks. For most people, this limit is offered as 50% to 75% of the total investment. For government employees, this limit is set at 50% and investors aged 60 and above have a cap fixed at 50%. This helps to stabilise the risk-return equation in the interest of investors.
Higher Returns
A portion of NPS goes to equities, but this may not offer fixed returns. However, the scheme offers much higher returns than other traditional tax saving schemes such as PPF. The scheme usually provides annualised returns in the range of 9 to 12% and also allows to change of the fund manager.
Conclusion
NPS is a retirement benefit offered by the Indian government. It helps to invest some money and earn regular income after retirement. This can be done through various well-known platforms such as PowerUp Money which offers an easy interface for quick investments. Apart from this, these schemes offer various considerable benefits such as flexibility, regulation, tax benefits, risk assessment and higher returns.