NPS Best Retirement Plan – All Detail

Hi friends hope you are doing well, lets read about NPS Best Retirement Plan, What is National Pension Scheme, Invest in NPS, NPS Different from PPF and EPF, Where is NPS Money Invested, Tax Benefits in NPS

Do you want to do your retirement plan, if yes, then this article is for all of you. Those who want to plan their retirement and want to spend the rest of their life comfortably without working. In this article, we are providing you complete information about NPS i.e. National Pension Scheme in Hindi, so all of you must read this article completely from beginning to end.

National Pension Scheme or NPS is a long term investment plan, which was launched by the Government of India. It acts as financial support for you after your retirement.

One of its benefits is that you get tax benefits in every way. In this article, we will give you complete information about the national pension scheme, what are its benefits and what are its disadvantages.

What is National Pension Scheme?

National Pension Scheme (NPS) was launched by the Government of India in the year 2004. Initially this plan was launched this pension program for all government employees all over India.

In this, every government employee invests some amount every month on regular basis till his retirement. After which when he retired, he used to get pension every month.

The format of NPS (National Pension Scheme) is similar to that of PPF and EPF which was launched by the Government of India in 2009. After which the Government of India made this plan common to all the people, now people from private sector employees to self-employed can invest in this plan.

This scheme is specially for those people who are not government employees. Such as employees of private sector, who do not get the facility of pension on retirement. It arranges pension for private sector employees and self-employed.

Who can invest in NPS?

In Friends NPS, every person can invest, whose age ranges from 18 years to 65 years. Especially this plan has been made for private employees only. Because private employees do not get any kind of pension after retirement.

In such a situation, if you do not want to take too high risk on your investment, then National Pension Scheme provides you the best offer. This scheme is for those people who do not want to invest in the stock market by taking high risk on their deposited capital.

All those salaried employees who want the highest tax deductions on their savings. National pension scheme is the best option for them. If you want to take advantage of tax deductions on your savings, then you must invest in NPS.

How is NPS different from PPF and EPF?

Friends, when it comes to NPS, how is it different from PPF and EPF? So let us tell you that – where the interest rate in PPF and EPF is already fixed. On the other hand, since some amount of NPS is invested in the share market, the interest rate is not fixed in it.

Due to which the return we get through NPS keeps on changing regularly. The biggest reason behind this happening is that some amount of NPS is invested in the share market. That’s why its interest rate also keeps on changing.

But investing your hard earned money in direct stock and taking high risk on it is not an easy task. If you do not want to take high risk on your savings, then NPS is the best option for you.

Because in NPS you get high return at low risk, if we talk about the returns given by NPS in the last ten years. So it has given an average annual returns of 8% to 10% to its customers in these ten years.

Many times it also happens that in NPS you get higher returns than PPF and EPF. Which is much more than the FD made by you.

What is the minimum investment in NPS?

Friends, if you want to get the National Pension Scheme account open, then you can get it opened by paying a minimum of 500 rupees. In this the minimum transaction requirement is also 500.

You can make your account regular by contributing a minimum of Rs 500 to your NPS account every year. If you forget to contribute a minimum of 500 rupees to your NPS account in any year. So in such a condition your account becomes inactive.

In such a situation, if you want to get your NPS (National Pension Scheme) account reactive again. So you will have to pay a minimum of 500 rupees for every single year (ie, for the number of years your NPS account was inactive).

Who Manages the NPS Fund?

Friends, the Government of India has given the responsibility of managing the NPS funds (National Pension Scheme Funds) to 7 fund managers. Whose information we are giving you below –

  • UTI Mutual Fund
  • Aditya Birla Capital
  • Life Insurance Corporation
  • Kotak Mahindra Bank
  • HDFC Pension Fund
  • SBI Pension Fund
  • ICICI Prudential Mutual Fund

As an NPS account holder, you can choose which of these fund managers will manage your account fund. Apart from this, if you want to change your fund manager anytime in the future, then you can change it.

Where is NPS Money Invested?

The money of National Pension Scheme Funds is invested in 4 categories mentioned below –

  • Low Risk – In this, your money is invested in Government Bonds, they are called assest of G class.
  • Moderate Risk – In this, your money is invested in Corporate Bonds, these are called assets of C class.
  • High Risk – In this your money is invested in equity and stock market. These are called assets of E class, maximum 50% of funds can be invested in it.
  • Very High Risk – This is the most high risk investment, so one can invest only 5% of his funds in this. This is an alternative to investment, in which your funds are invested in Real Estate Investment Trusts, Infrastructure Investment Trusts, Alternative Investment Funds, Cat I and II, etc. These are called assest of A class.

How are NPS funds allocated in assets?

Friends, if you get an account opened in the National Pension Scheme, then you have full rights. That you can decide that what percentage of your account should be invested in which class of funds. In this way you are given two options for investment –

1. Active Choice Option

Active choice allows the account holder of the National Pension Scheme to decide the distribution of his investments in different schemes. There’s a catch here though. You are allowed a maximum equity allocation of 75% of your funds till the age of 50 years. You cannot give 100% allocation to an equity fund. Also, once you attain the age of 50 years, your equity allocation starts declining by 2.5% in each of the successful years of investments. Finally, when you reach 60 years, your equity allocation comes down to 50%. Funds will be moved from equity bond to government or corporate bond. The reason is that equity bonds are high risk, and the objective of the scheme is to reduce the risk of your investments as you age. Apart from this, the division of other investments can be changed twice a year.

2. Auto Choice Option

Auto Choice option is for those people who are overwhelmed by the division of investment. Auto choice decides the risk profile of your investment according to your age. The older you are, the more stable and less risky your investments will be. Auto option gives you three investment options:

  • Aggressive Life Cycle Fund – This is for those taking high risk. It allows maximum equity allocation of 75% if you are of 35 years or less. Thereafter, the equity allocation drops to 4% per year. Once you reach 55 years, the equity allocation is fixed at 15%.
  • Moderate Life Cycle Fund – It allows maximum 50% equity allocation if you are of 35 years or less. After this the equity allocation will decrease by 2% per year, in the end it will rest at 10% after 55 years.
  • Conservative Life Cycle Fund – It allows maximum 25% equity allocation for a maximum of 35 years or less. After this the equity allocation will drop to 1% per year, finally when you are 55 years old then it will rest at 5%.

What is the withdrawal rule in NPS?

Friends, the lock-in period in NPS (National Pension Scheme) is up to 60 years. Therefore, you cannot withdraw money from your NPS account until you reach the age of 60 years.

Once you reach the age of 60 years, after that you can continue or postpone it if you want. Once you reach the age of 60 years, you can withdraw up to 60% of your funds from your NPS account.

With the remaining 40% fund, you have to buy an annuity plan because it is mandatory. After which you are given regular pension on this 40% by PFRDA registered insurance company.

Apart from this, if you want, there is also an option to get 60% of your NPS fund in 10 installments by not withdrawing the fund in lump sum, till your age is 70 years.

After all this, when only 2 lakh rupees are left in your National Pension Account. Then you can withdraw the entire amount of this 2 lakhs in a lump sum.

If you want to withdraw the entire amount of the fund before your NPS fund matures, then you cannot do so. But yes, if you continue to contribute for 3 years in your NPS account, then you can withdraw up to 25% of the contribution of 3 years.

You can do this only a maximum of three times, that too after every withdrawal, you have to keep a gap of five years. After the first withdrawal, you cannot withdraw even a single rupee from your NPS account for the next five years.

Apart from this, if you ever have any kind of emergency, then you can withdrawl from your NPS account. You can withdrawl in case of serious illness, children’s education, marriage, building or buying a house, getting medical treatment for self or family, skill development or business.

What is premature exit?

If you want to have premature retirement i.e. you want retirement before the age of 60 years. And if you want that your pension starts under National Pension Scheme, then you can apply for premature exit for this.

To get the benefit of premature retirement, it is necessary to have a contribution of 10 years in your NPS (National Pension Scheme) account. Out of which you can withdraw only 20% of the maximum amount, with the remaining 80% amount you will have to buy an annuity plan.

If the total fund in your NPS account is less than Rs 1 lakh, then you can withdraw this entire amount in one go. Once you take the premature exit, your National Pension Scheme account gets closed.

What are the Tax Benefits in NPS?

Friends, you get tax benefits in the National Pension Scheme, this scheme comes in the exempted exempted category. You get tax benefits on the return received in this scheme, you get tax benefits in the contribution you make, along with this you also get tax benefits when you withdrawl.

That is why this scheme is called exempt exempt exempt category scheme. In this, along with the contribution made by you, up to 1.5 lakh can be claimed for the employer’s contribution.

  • 80CCD(1) covers self-contribution, which is a part of section 80C. Maximum deduction can be claimed under 80CCD(1). 10% of Employee Salary, but not more than this limit, for self-contribution taxpayer, this limit is 20% of gross income.
  • You can claim additional self-contribution up to Rs 50,000 under section 80 CCD (1B) as NPS (National Pension Scheme) tax benefits. Therefore, this scheme allows a total tax deduction of up to Rs 2 lakh.
  • 80CCD(2) covers the NPS contribution of the employer, which is not a part of section 80C. This benefit is not available to the self-employer taxpayer. The maximum amount eligible for deduction will be the lowest of the following. (A) Actual NPS contribution by the employer, or (B) Basic + DA, or C 10% of the total gross income shall be eligible for maximum tax deduction.

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