Having a definitive retirement plan is essential for everyone and is imperative for a secure future. But simply formulating oneis not enough. You need the assistance of specific schemes to facilitate your plan. This is where the National Pension System or NPS is helpful. It is a retirement-benefit scheme launched by the Indian Government. It is governed by the Pension Regulatory & Development Authority.
It operates through a Permanent Retirement Account Number, allotted to every subscriber. It aims to facilitate regular income post-retirement for its holders. Following are some essential aspects of NPS you should know about:
- Flexibility
NPS provides flexibility to its holders to park their surplus funds temporarily. They can maintain the excess money through the Tier II Account until needed. They can alsouse their account with investments as little as Rs. 500 to Rs. 1,000 per annum.
- Voluntary scheme
NPS is a voluntary scheme. It is available to every Indian citizen between 18-65 years old, working in the private or unorganised sector.
- Accessibility
Holders have the option of operating their accounts from anywhere in India. With the vast availability of Point of Presence (PoP) networks, they caneasily monitor and manage their funds.
- NPS Calculator
The NPS Calculator is an online tool that assists citizensin gaininginvestment details. These include the total amount invested, interest earned, total corpus generated upon maturity, etc.
- Low-cost scheme
The best part about this scheme is that it manages automated asset allocation and separately for individual accounts. It starts with a higher percentage of equities and gradually transitions to fixed income as the holder ages. This feature makes it an appealing, low-cost scheme.
- Tax benefits
The subscribers of NPS enjoy tax benefits like:
- Tax deduction up to 10% of salary per section 80 CCD(1) within the overall ceiling of Rs. 1.50 lakh under section 80 CCE.
- Tax deduction up to 20% of gross income per section 80 CCD (1) within the overall ceiling of Rs. 1.50 lakh under section 80 CCE.
- Tax exemptions on the amount withdrawn up to 25% of the self-contribution, as specified by PFRDA under section 10 (12B)
How does the NPS Calculator work?
The NPS Calculatorcan be used by anyone eligible to invest in the scheme. It computes the estimated corpus that the holder accumulates upon maturity. For this, it asks for details like:
- The holder’s current age and the age they wish to retire
- The amount the holder will invest every month
- The returns expected out of the NPS investment
- The number of years the holder wishes to receive the monthly pension (post-retirement)
Upon receiving the inputs, the calculator computes the accumulated corpus holders can expect during their retirement.
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