Not just investment, great returns too! Why NPS is becoming the first choice for retirement fund, know everything

National Pension System Benefit: In today’s time, merely saving is not enough, it has also become very important to remain financially independent after retirement. Keeping this need in mind, the Central Government started the National Pension System (NPS) from January 1, 2004. It is a long-term investment plan, the objective of which is to provide regular income (pension) to people after retirement. Initially this scheme was applicable only for government employees, but now any Indian citizen between 18 to 70 years can invest in it.

In such a situation, if you are also planning to invest in the NPS scheme to secure your future after retirement and to avoid financial crisis in old age, but you do not know much about how it works, how much return you get, when you can withdraw the money. So today we are going to tell you complete details about it.

What is National Pension System?

Actually, NPS is a market linked retirement scheme, in which the investor deposits money regularly as per his capacity. Investment returns over time grow your retirement fund. On completion of 60 years of age, a part of this fund can be withdrawn in lump sum, while the remaining amount can be purchased from the annuity and get pension every month. In this scheme, there is a possibility of getting good returns in the long term, the cost of investment is low and the benefit of tax saving is also available.

Along with this, financial security is maintained by getting regular pension after retirement. It is also easy to operate as it has the facility to open and invest online account. Any Indian citizen between 18 to 70 years of age, whether employed, businessman or self-employed, can invest in NPS. For this, it is necessary to complete the process of Aadhaar, PAN, bank account and KYC. Non-Resident Indians (NRIs) can also open an NPS account under prescribed conditions.

How to open NPS account?

At the same time, now opening an NPS account has become very easy. Any person can open an account online sitting at home or offline through a bank branch. Online account can be opened through NSDL eNPS portal, KFintech eNPS portal, internet banking of various banks or other authorized platforms. Whereas, if someone wants to adopt the offline process, then he can apply by visiting any authorized bank, post office or NPS Point of Presence (POP).

There is no maximum limit for investment in this scheme. In Tier-1 account, a minimum deposit of Rs 500 is required at the time of account opening and a minimum investment of Rs 1,000 is mandatory in the entire financial year. After this the investor can invest monthly, quarterly or annually as per his convenience. The more and sooner you start investing, the bigger the corpus you can create by retirement.

The biggest feature of NPS

The biggest feature of NPS is that investment in it is not made at just one place. Investor’s money is divided among the stock market, government securities, corporate bonds and other investment options. The investor can decide the asset allocation as per his choice or can opt for auto choice, in which the investment ratio automatically changes as per the age. NPS does not provide fixed interest like bank FD, because it is a market linked scheme. Its returns depend on the performance of your chosen pension fund manager and the assets invested.

Over the last several years, various NPS funds have given an average return of around 9 per cent to 12 per cent per annum, while some equity-based schemes have seen even better performance. However, future returns depend entirely on market conditions and are not guaranteed.

NPS also popular for tax saving

Along with this, NPS is also a very popular scheme for saving tax. income tax act Tax exemption is available on investment under section 80CCD(1). Apart from this, additional tax exemption of up to Rs 50,000 can also be availed under section 80CCD (1B). If the employer also contributes to NPS, there is a separate tax benefit under section 80CCD (2). For this reason, NPS is considered a good option for retirement planning as well as tax saving.

When the investor completes the age of 60 years, he is allowed to withdraw up to 60 percent of his total deposited fund as a lump sum. It is mandatory to purchase annuity with at least 40 percent of the remaining amount. On the basis of this annuity, the investor gets pension every month. If the total corpus is less than the limit prescribed by the regulator, withdrawal of the entire amount at once may also be allowed in some cases.

Can money be withdrawn before 60 years?

So let us tell you that NPS is not a completely lock-in scheme. If the investor needs money for a special need, he can make a partial withdrawal of up to 25 percent of his own contribution after investing for at least three years. This facility is given for needs like children’s education, marriage, buying a house, building a house or treatment of serious illness. At the same time, if an investor wants to completely exit NPS before the age of 60 years, then under normal circumstances he can withdraw only 20 percent of the amount in lump sum, while it is mandatory to buy annuity from the remaining 80 percent amount.

According to market experts, although NPS has many advantages, it also has some limitations. The returns received in this completely depend on the market, hence fixed interest is not guaranteed. Apart from this, it is not allowed to withdraw the entire amount before 60 years of age and at the time of retirement it is mandatory to buy annuity with at least 40 percent of the amount. The monthly pension received from annuity also depends on the interest rates prevailing at that time and the plan chosen.

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What is the expert opinion regarding NPS?

Experts say that if your age is young, you can make regular investments, Big fund for retirement If you want to make money and also want to avail the benefit of saving tax, then NPS can be a better option for you. It is considered especially beneficial for those who want to invest in a disciplined manner for the long term and receive income in the form of regular pension after retirement.