A Detailed Guide On NPS Calculator Meant For Government Employees
The government of India has launched the National Pension Scheme (NPS) to safeguard its senior citizens by providing financial stability after retirement. NPS is a savings cum investment scheme that offers a plethora of benefits to central government employees as compared to normal citizens of India.
Let’s take a deeper look at what NPS is and how the NPS calculator for government employees offers a spectrum of benefits.
What is the National Pension Scheme or NPS?
This popular pension scheme is conceptualized and designed by the Pension Fund Regulatory and Development Authority (PFRDA) and is the most suitable investment product for seniors.
Some features of this plan are:
- Though it is available for all senior citizens, still, it’s mandatory for government employees.
- Under this plan, you can invest till 60 years of age. After that, you will get an annuity from the life insurance company on 40 per cent of the entirety.
- The government gives freedom to its employees to select investment patterns
- In tier-1 accounts, the government’s contribution has increased from 10% to 14%
- After completion of the 3-year lock-in period, there is a tax deduction for up to Rs. 1.5 lakh under section 80C of the Income Tax Act (In the NPS Tier-2 account)
What is the NPS Calculator for Central Government Employees?
NPS pension calculator for central government employees is a convenient, easy-to-use tool. This tool usually calculates the estimated amount that a person receives after retirement just by filling in a few prime details of the scheme.
NPS Calculator for State Government Employees Formula
Let’s understand the formula used by the NPS Calculator for State Government Employees:
FV= P (1+ R/N)^ NT
F= Final Value
P= Principal Sum
R= Rate of interest per annum
N= Total no. of times the interest compounds
Illustration of the Formula used by the NPS Calculator for Central Government employees
Mr. Desai is planning to invest Rs. 3000 monthly in his NPS account. Let’s assume that his age is 34 and the rate of interest is 10%. If you add the remaining 26 years of pension amount, then according to the NPS formula:
- His principal investment amount till the time of retirement is Rs. 9.36 lakh
- The approximate amount that Mr. Desai will get at the time of maturity is Rs. 44.35 lakh
Benefits of NPS Calculator
- There is a minimal chance of error as everything is calculated automatically
- You can know your pension amount anytime. This will help you to plan your financial portfolio advance
- You are calculating everything online. Thus, you don’t need to visit any bank.
What are the Imperative Details required for NPS by the Government Employees?
- Present age
- Investment type (monthly or yearly)
- The planned amount for investment
- NPS choice option (active or auto choice)
Eligibility criteria for NPS
Let’s take a look at the eligibility criteria for the NPS scheme that is backed by the government.
- Only Indian citizens who are residing in India can open an NPS account
- The minimum entry age is 18 years for an NPS account
- The maximum entry age is 65 years for an NPS account
- To open an NPS account, a person should be KYC compliant
- A person can open only one NPS account
How to Invest in an NPS Account?
To invest in an NPS account, a government employee needs to follow the below-mentioned steps:
- First, visit https://enps.nsdl.com/eNPS/NationalPensionSystem
- Check the guidelines to complete the registration process
- Select the suitable option to register
- Enter all details including, name, address proof, aadhar card, pan card, mobile number, age, email id, etc.
- Check the OTP sent on your registered cell phone number
- As per your requirements, select the type of investment account
- Select the desired investment strategy (active or auto choice)
- Enter all the details of the nominee
- After the completion of your registration, you can access your NPS account
- Once your registration process is completed, PRAN (Permanent retirement account number) is generated
Types of NPS Account
NPS accounts can be divided into two segments:
1. Tier-1 Account
- This type of account primarily works as a basic pension account
- Withdrawals are accepted after following certain rules
- Rs.500 is the minimum amount that you need to open a tier-1 account
2. Tier-2 Account
- This type of account is a voluntary account
- Investments and withdrawals offer liquidity
- To open a tier-2 account, you should possess a tier-1 account
- You need Rs. 250 to open a tier-2 account
What are the choices you will get under the NPS Account?
1. Auto choice
- Under the scheme, you will get the default option
- Investor’s age and asset’s allocation are related directly
- Proportion is auto-selected
2. Active Choice
- Asset allocations are performed between equity, corporate bonds, and government securities
- An investor is free to decide the allocation of assets
- Under the equity, the maximum limit allocated is 75%
- An investor can shift between fund managers and investments
Some noticeable Tax Benefits under NPS
- In the case of tier-1 accounts, tax deductible up to Rs. 1,50,000 is allowed under the section 80CCD (1)
- For tier-1 investments, up to Rs.50, 000 is allowed as deductions under section 80 CCD (1 B)
- For tier-1 investments, central government employees are eligible for deductions up to 14% and 10% for the rest under section 80 CCD (2)
Nation Pension Scheme (NPS) is a trustworthy scheme that offers income even after your retirement. The plan offers financial security to Indian citizens so that they can lead a tension-free retired life. Always consider your future planning and requirements, before investing in any scheme.