List of 8 Top Benefits of the National Pension System (NPS) in India
Everyone wants to get a stable passive income after retirement. But this option is possible only for Government employees. But in the case of an individual who works as a freelancer, does business, or works in a private sector, has no or very limited option to receive a passive income in the form of pension throughout the rest of his life.
Working and making money even after the retirement age for the rest of your life is really a big challenge to everyone. So, sustaining a quality life after retirement has become a question to many people. But, regardless of your profession, you can still plan for your pension after 60 years of age. There are several national pension schemes available in India provided by insurance companies and other financial sectors to make this possible.
What is NPS?
Many people might have a doubt about what is NPS scheme? A clear understanding of what is NPS scheme can help everyone get benefited from it. Here is a brief about the National Pension Scheme.
The National Pension Scheme in India provides the best financial security to the individual. It will also create stability in your financial status during your old age by creating a regular source of income at your older age. NPS will also ensure that you lead a decent and self-sustained life without depending on anyone. You may also need not compromise the standard of living that you are living until and, most importantly, have the freedom to get updated with the latest lifestyle with your income with advancements happening in the world.
The NPS online also creates an opportunity to invest money and create a form of saving. This will help you get a lump sum amount in addition to your regular payouts.
How does an NPS plan work?
The NPS account is retirement-oriented. This is an investment option available to provide you with a periodic annuity in the form of a monthly pension. It is ideal for Indian people who are salaried, freelancers, self-employed, and work in private sectors like doctors, lawyers, small-scale entrepreneurs, and others.
Any citizen of India who is between 18 to 70 years of age can apply for the NPS benefits. The Government of India introduced this regular income-generating post-retirement plan. This scheme is governed by PFRDA – Pension Fund Regulatory and Development Authority.
List of 8 Top Benefits of NPS Scheme in India
- To open this NPS account, you might need a PRAN – Permanent retirement Account Number. This number will be allotted to all applicants on submission of your NPS full form.
- Since this NPS account is regulated by PFRDA under the Ministry of Finance; it ensures transparent norms to the account holder. The NPS trust further ensures adherence to guidelines, which is done through regular monitoring.
- Since this is a voluntary scheme for Indian citizens, you are flexible to invest in your chosen NPS account.
- You are flexible to open the account anytime you want it.
- This is the most flexible plan that you can choose.
- You also have the flexibility to change the fund manager as you want it, thereby you can optimize the return as you want it with various assets like corporate bonds, equity, government securities, alternate assets, and more.
- This is the best low-cost investment plan that is available for you.
- Regardless of your employment status and how it might change in the future throughout your life and the city or state you are in or you have changed to, the NPS account will remain the same.
Benefits of National Pension Scheme (NPS):
This is the most expected part of national pension scheme benefits. Both the salaried and self-employed can avail tax benefits as part of NPS advantages. Therefore you are never limited by it.
Here is more about your tax benefits from the NPS scheme:
Tax benefit for the salaried individuals:
- Up to Rs. 50,000/- under Section 80CCD (1B) which is over and above Rs.1,50,000 under Section 80C are available for the salaried people
- You have the flexibility to invest up to 10% of your basic salary and allowance to avail tax exemption on your invested among
Tax benefit for the Self-employed individuals:
- You are flexible to claim your tax exemption up to Rs. 50,000/- under Section 80CCD (1B) which is over and above Rs. 1,50,000/- under section 80C
- You can invest about 20% of the gross income you get per annum and claim your tax exemption on your invested amount under SectionCD(1). This tax exemption is also limited to Rs 1, 50,000 of the Income Tax Act, 1961.
NPS Account Type
The National Pension Scheme is available under various types, and to point a few, here they are:
- NPS for all citizens: Under this type, you will be the only contributor, and you make all selections, including your preference, annuity service provider, investment choice, and other aspects of the scheme. Any citizen of India can choose this plan as an investment and saving option; anyone between 18 and 70 years of age can avail of this plan.
- Corporate type: Under this plan, you and your employer can propose to choose it. This is a corporate entity that is registered for corporate employees to gain the pension benefit.
There are also sub-accounts available under the NPS in the form of tiers, and they include:
- Tier I: This pension account is for up to Rs. 50,000/- and this is eligible for added deduction from taxable income under Section 80CCD(1B)
- Tier II: In this type, you can invest an additional amount, and you are also free to withdraw your entire accrued corpus. If no contribution is made as an initial contribution to the Tier-II account, it will be automatically deactivated. There will also be no tax benefit available in this case, and the fund from Tire II will be transferred to Tire I.
So, if you haven’t planned for your retirement, do it with the National Pension Scheme to receive a regular flow of income and lead a comfortable and stress-free life.