The National Pension Scheme (NPS) is a social security program initiated by the Central Government. It allows Indian citizens from the public, private, and unorganized sectors to invest in a pension account at regular intervals. It is ideal for anyone who wants to plan for their retirement early on in life.
How it works
The funds are locked in until the investor reaches retirement age (60 years), after which they can withdraw 60% of the amount. The remaining 40% is released to the investor in the form of a pension. The best part is that as of December 2018, the entire corpus is tax-free, making it one of the best low-risk investment options available.
If you invest in the NPS through Finserv MARKETS, you can avail a deduction of Rs. 1.5 Lakh under section 80C of the Income Tax Act 19641, and an additional deduction benefit of Rs. 50,000 under section 80 CCD for a total tax benefit of Rs. 2 Lakh.
It is important to note that the annuity or the pension is taxable in the hands of the investor in the year of receipt. The amount of pension received will be added to one’s income and taxed as per one’s income tax slab.
Flexibility of investment distribution
There are two options to invest in – auto choice or active choice. The auto choice decides the risk profile of your investments as per your age. For instance, the older you are, the more stable and less risky your investments.
The active choice allows you to decide the scheme and to split your investments. You can allocate a maximum of 50% of your investment to equities.
The scheme is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Each subscriber who joins the NPS is allotted a unique Permanent Retirement Account Number (PRAN) number. The PRAN remains the same throughout life.
Portability and online tracking facility
Opening an NPS account online through Finserv MARKETS is simple and quick. You will receive a PRAN (Permanent Retirement Account Number), which you can use to log in to your account. You can then manage/track your NPS account anywhere in India.
To know more about the National Pension Scheme and how you can use it to plan for a comfortable retirement, apply online through Finserv MARKETS.