If you want to invest in National Pension Scheme (NPS), saving Rs 400 per day can give you up to Rs 1.78 lakh per month.
National Pension Scheme (NPS) is the most preferred investment option for building a retirement fund. This scheme is operated by Pension Fund Regulatory and Development. That is, this scheme is a scheme directly related to the government. To avoid financial crunch during your retirement, financial planners recommend young professionals to invest in it. Under this scheme you can save Rs 400 per day or Rs 12000 per month, get Rs 3 crore on retirement and get monthly pension of Rs 1 lakh.
Beneficial for non-government employees
It is often observed that salaried persons (mostly non-government employees), who do not get pension from their employers, may face financial crunch if their retired life extends beyond 10-15 years. Because they mostly invest their hard earned money in fixed deposits to protect their retirement corpus. According to experts, they can accumulate a huge corpus for their retirement by investing their savings in a scheme like NPS.
Where can you invest
In this scheme, your personal savings are converted into a pension fund. PFRDA invests in government bonds, bills, corporate debentures and shares. Under this, you get an increase year after year only on the return you get on the investment you make.
Think of NPS as
As per the rules of NPS, it is necessary to purchase an annuity from at least 40 per cent of the net NPS maturity amount. On the other hand, if an investor wants to increase this limit, then he can also increase it. If an investor invests Rs 12,000 every month in his NPS account for 30 years with equity-debt exposure ratio of 60:40 and buys 40 per cent annuity from the net NPS maturity income, then it will get 10 per cent return on investment. Assuming that he will get a lump sum income of Rs 1,64,11,142 and a monthly pension of Rs 54,704.
Better investment in times of rising inflation
As inflation in India has remained historically high, the interest income that retirees get from their fixed deposit investments is decreasing with each passing year. They are being forced to withdraw from the principal to meet their expenses. To avoid such a situation, National Pension System (NPS) is one such fund-raising tool, which can help in accumulating a large corpus for retirement by investing a small amount every month. By investing in NPS, you will get a fixed monthly pension till you survive and also get a lump sum amount at the time of retirement.
60 percent tax-free withdrawal facility
A subscriber can withdraw up to 60 per cent of his maturity amount from NPS as a tax-free lump sum tax and investment expert Balwant Jain says, and with the remaining amount, he will have to buy an annuity from a life insurance company. In this, at the age of retirement, you have to invest at least 40 percent of the corpus in the account to buy an annuity plan.
Income Tax Exemption Under 80C
According to Balwant Jain, the NPS account holder gets income tax exemption of up to Rs 1.5 lakh under section 80C and an additional Rs 50,000 under section 80CCD. According to Value Research, equity savings funds have given annual returns of more than 8 per cent in the last 10 years. If we assume that these returns will continue in future also then your investment corpus will continue to grow even if you withdraw 6 per cent corpus (Rs 3 crore) annually through SWP (Rs 1.5 lakh * 12). Recently the age of entry in NPS has been revised from 18-65 to 18-70.
