Are you also worried about your financial freedom after retirement? In today’s era, just saving money is not enough, but it is important to invest it in the right place so that you do not have to depend on anyone in old age. The Central Government’s ‘National Pension System’ (NPS) has emerged as an excellent option to meet this need. This scheme, which was started on January 1, 2004, is no longer limited to only government employees, but any Indian citizen aged 18 to 70 years can strengthen the foundation of their future by investing in it.
After all, what is the National Pension System? NPS is a ‘market linked’ retirement scheme. This means that your money is invested in the stock market, government bonds and other assets. When you turn 60, you can withdraw 60 percent of the accumulated fund as a lump sum, while the remaining 40 percent gives you a regular monthly pension. The biggest feature of this scheme is the low investment cost and huge tax exemption. Any employed person or person doing his/her own work can easily start it online or offline (Bank/Post Office).
Mathematics of Investment and Returns There is no maximum limit for investment in NPS. You can open your account with just Rs 500 and it is mandatory to deposit at least Rs 1,000 in a year. According to experts, NPS has given an average annual return of 9% to 12% over the last few years. Although it completely depends on the market performance, in the long run it is very effective in building a large retirement fund through compounding. In this, you can choose yourself how much of your money goes into the stock market and how much into safe government bonds.
Smart way to save tax If you want to save tax, there is nothing better than NPS. You can get exemption on investment under Section 80CCD(1) of the Income Tax Act. Apart from this, you get additional tax exemption of Rs 50,000 under Section 80CCD(1B). That means overall you can save a good amount of tax.
emergency evacuation facility Many people think that NPS money is completely ‘locked’, but it is not so. If you are in dire need of money for needs like children’s education, marriage or any serious illness, then after three years of investment, you can withdraw 25% of your total contribution. This means that you can easily get your own money when needed.
Experts’ Opinion: Should you invest in it? Financial experts believe that NPS is an excellent option for those who want to build a large corpus for retirement in a disciplined manner and also want to save tax. The sooner you start investing in this, the bigger fund you will have at the time of retirement. If you want to ensure a secure and regular pension for the long term, plan to invest in NPS today.
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