What is NPS And who can invest in it?
Did you know about NPS – National Pension System? Have you considered investing your money where low costs, tax saving, retirement benefit, and equity exposure come together?
By: Alankit Group
Before investing money in any financial instrument, it is important to understand how the instrument works. NPS is a financial security tool launched by the Government for the citizens of India. This voluntary savings scheme encourages subscribers to invest in their retirement through regular contributions during their employment. This financial security system is regulated by Pension Fund Regulatory and Development Authority (PFRDA) and follows transparent investment standards; offering subscribers fixed and reasonable returns on their long-term investments. The NPS account can be operated from anywhere in the country and is eligible for tax benefits as stated under Section 80C of the Income Tax Act.
Investors – Residents of India or NRIs who intend to invest in NPS can contribute annually till they turn 60 years of age and the minimum age eligibility criteria for investment is 18 years. They can claim a tax deduction of INR 1.5 lakh under Section 80C and can also be benefitted from the additional deduction of INR 50,000 under Section 80CCD. People with higher tax bracket means a savings of INR 15,600 can be availed a year. Regulated by PFRDA, NPS is not similar to a Public Provident Fund (PPF) account where investors have only one option – they invest and get a preset interest rate. While in NPS, investors have a choice to make. There two accounts – Tier I and Tier II. Tier I account is a pension account that allows tax benefit and is mandatory to open for NPS, whereas the Tier II account is an optional account with a flexible withdrawal feature.
HOW TO USE NPS IN YOUR PORTFOLIO?
Don't invest in NPS with the only aim to be benefitted from tax. For instance, keeping aside INR 50,000 to save tax for around 20 years, the corpus will not add significantly to meet entire retirement needs. Besides, it will also deprive one of a lot of pension benefits. It is advised to link the NPS investment(https://www.alankit.com/
NPS Procedure & Subscription
• Subscribers are required to fill the application form with the required details
• For NPS Application, KYC documents are to be submitted along with the NPS Application form
• Minimum NPS contribution of INR 500 is to be made
• PRAN (Permanent Retirement Account Number) will be generated and shared with the subscriber within 7 business days
• The PRAN Card will be delivered within 20 business days at the address provided by the subscribe