Introduced by the government of India, the National Pension System (NPS) is a voluntary retirement savings scheme where you need to contribute a minimum amount each year at desired frequency until you attain 60 years of age.
Once you attain 60 years of age, you can withdraw up to 60% of the accumulated corpus lump sum. The remaining corpus in your NPS account is invested in an annuity plan which is a pension plan policy offered by a life insurance company. It provides you with a regular source of income at desired frequency for life.
The host of different advantages that the National Pension System offers makes it one of the most popular pension plans in India. Let’s take a look at a few of the key benefits offered by this scheme.
NPS gives you the option to switch from one investment fund to another. This unique ability can come in handy during market downturns since you can simply opt to switch from equity funds to debt funds to preserve your capital.
As you continue to make regular contributions to your NPS account every year till your retirement, you bring about a compounding effect.
Once you open an NPS account, you’re provided with a login ID and password. You can use these credentials to log into your NPS account and manage it online.
The National Pension System is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The PFRDA safeguards the interests of investors by ensuring transparency and adherence to all the applicable investment guidelines and norms.
Contributions that you make towards Tier-I NPS accounts are eligible for tax benefits. You can claim a maximum of up to Rs. 1.5 lakhs per financial year as a deduction under section 80C of the Income Tax Act, 19611. You also get an additional deduction of Rs. 50,000 under section 80CCD(1B).
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