Do you want to grow your wealth and simultaneously build a substantial retirement corpus? If financial wellbeing is on your mind, look no further than the National Pension Scheme (NPS). It is an excellent long-term investment tool you can use to invest for your retirement. However, before we begin exploring the NPS account benefits, let’s take a look at everything you must know about this scheme.
What is NPS?
Also called the National Pension System, the Government of India launched NPS as a contribution scheme that comes with a host of investment choices. When launched in January 2004, this scheme was meant for government employees, but this changed in 2009 when NPS was open to all.
How does the NPS scheme function?
NPS helps individuals to decide where to invest their pension wealth. Holders of NPS accounts are expected to make regular contributions to their pension fund throughout their employment tenure.
An individual with an NPS account has to contribute a minimum of Rs. 6,000 every year or Rs. 250 depending on their type of NPS account. After staying invested until retirement, they can choose to withdraw a part of the sum, about 60%, and put it to good use. The remaining amount, preferably 40% of the total invested sum, should be used to purchase an annuity and set up the means for a regular income after they retire.
Note that there are two types of NPS accounts: Tier I and Tier II. The sum accumulated in the Tier I NPS account cannot be withdrawn until the account holder reaches 60 years of age or has retired. However, Tier II NPS accounts also act as a voluntary savings account, i.e., the account holder can withdraw their accumulated funds whenever they want.
Under the unfortunate circumstances of the demise of the account holder before 60 years, the entire sum will be paid to the nominee or legal heir of the account holder.
Know more about the NPS Tier 1 and NPS Tier 2 tax benefits here.
What is the eligibility for opening an NPS account?
Indian citizens aged between 18 and 60 can open an NPS account. Every NPS account holder is issued a 12-digit unique number called the Permanent Retirement Account Number or PRAN. It is also mandatory that the person fulfils the requisite Know Your Customer (KYC) norms.
What are the National Pension Scheme benefits?
If you are wondering why you should invest in the NPS scheme, here’s your list of NPS benefits. NPS is a low-cost pension and investment product among the many NPS scheme benefits. Besides being effective for retirement planning, it is a key tool offering secure long-term returns and considerable income post-retirement. It is also a tax-efficient instrument. These features make it an ideal investment vehicle for diversifying your portfolio.
Some of the other perks associated with NPS include:
- Account holders are free to choose where to invest
- Investments under NPS are handled by highly qualified pension fund managers (PFMs)
- The account holder can determine the value of the monthly contribution
- NPS accounts can be managed from any part of India
- NPS fetches annual tax benefits of up to Rs. 2 lakh
Now that you know the NPS benefits, are you ready to start building your wealth? Just click the below link and open your NPS Account!
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice before you take any/refrain from any action.
