NPS scheme: National Pension System (NPS) is a retirement-oriented investment option that provides a periodic annuity (in the form of monthly pension) and a lump sum corpus on the attainment of retirement age. NPS scheme is one of the ideal pension and retirement planning schemes available in India for salaried, self-employed professionals and freelancers like lawyers, doctors, chartered accountants, entrepreneurs, architects and others who work in their individual capacity wherein no employer is attached. Any Indian citizen aged between 18 and 70 years can enroll in this scheme.
Speaking on NPS scheme; Supratim Bandhopadhyay, Chairman, PFRDA (Pension Fund Regulatory Development Authority) said, “NPS perhaps offers a higher degree of flexibility to subscribers’ like choice of a pension fund manager and asset allocation. An investor with a greater risk appetite can invest up to 75 per cent of its fund in equity. This scheme has a proven track of providing one of the best returns in the market along with tax deduction benefits of ₹2 lakhs. It is a cost-efficient investment that ultimately benefits the subscribers.”
Asked about the top 5 benefits of NPS account, the PFRDA Chairman listed out the following:
1] Flexibility with comfort: NPS provides investor an option to contribute any amount anytime as per their convenience. There is no upper limit on how much one can invest.
2] Husband-wife duo can enroll: Self-employed couples who run their family business can open separate NPS accounts and avail the tax benefits in their individual capacity. This will facilitate higher corpus and pensions when they decide to stop working.
3] Employees loyalty booster: NPS can be extended by an employer to its employees to encourage loyalty for the enterprise they work with. Not only it will secure the future of employees but the employer can claim for such NPS contribution as business expenses under Section 36 (1) (IVa) of the Income Tax Act.
4] Avail/Maximise tax deductions benefit: NPS contributions made by self-employed professionals towards NPS can be claimed as deductions up to 20 per cent of their gross annual income for the purpose of taxation. Salaried NPS subscribers can also claim tax deduction against the NPS contribution made by employer under Section 80 CCD(2) and under Section 80CCD(1B) an exclusive tax deduction of ₹50,00 is allowed for NPS investments.
5] Entrepreneurs can secure their future even when enterprise ceases to exist: Any business is a risky proposition and full of uncertainties. But one can secure one’s pension by contributing to NPS which would be separate from the enterprise as NPS is an ‘individual pension account’.
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