NPS cover ensures a secure and tension-free retired life

Both corporates and retail investors are coming fast under the National Pension System (NPS) cover, thanks to the attractive return on investment being offered by it.

However, an impending challenge employees or workers may face in India is the risk of inadequate pension arrangements post-retirement. In the fallout, individuals may either be required to put severe curbs on their post-retiral expenses or continue working beyond the retirement age. Hence, it is essential that one should take early and active steps towards planning, saving and investing for a secure retired life.

Towards this, NPS offers multiple benefits like systematic retirement planning and creation of a pension corpus along with tax benefits. NPS is one of the most customer-friendly and flexible pension plans in contemporary times. Low-cost and transparent, it is a regulated, professionally managed portable pension plan that suits every individual.

Former chairman of PFRDA, Supratim Bandyopadhyay, told Bizz Buzz “Exclusive benefit has been given under Section 80 CCD (1B) so that people get adequate financial support post-retirement. This is the reason more and more corporates and even individuals are coming under the NPS fold. It is evidenced from the fact that there has been a 30-35 per cent annual increase in the NPS corpus over the last few years”.

According to him, “Those who have opted for maximum 75 per cent of their investment in equities under NPS, are getting 12-13 per cent return annually.”

Here are some compelling reasons to opt for NPS.

Tax benefits on investment of Rs 1.5 lakhs u/s 80C: NPS is one of the listed investment options, eligible for deductions u/s 80C.

Total deduction limit: It is Rs 1.50 lakh under u/s 80C and the amount contributed towards NPS can be claimed as a deduction, subject to a ceiling of 10 per cent of salary (20 per cent of gross income for the non-salaried).

Tax benefits on additional investment of Rs 50,000 u/s 80CCD (1B): This additional tax benefit is exclusively available to NPS subscribers to claim tax deductions up to Rs 50,000 over and above the deduction u/s 80C. Effectively, this translates to a total deduction of Rs two lakh for NPS subscribers i.e. Rs 1.50 lakh u/s 80C and Rs 50,000 u/s 80CCD (1B).

Tax benefits under Section 80CCD(2): If an employer contributes towards NPS account of an employee (subscriber), the latter can avail deductions u/s 80 CCD(2) in addition to the tax benefits available u/s Sec. 80C, subject to a ceiling of 10 per cent of salary or Rs 7.50 lakh.

Tax benefits on returns and maturity amount: NPS belongs to a covetous category of financial products, which offers a tax treatment of EEE- exempt-exempt-exempt. Not only on investment but even the returns and maturity proceeds of NPS get tax exemption. This EEE tax treatment is available only to select financial products.

Low-cost product: NPS is the lowest cost pension scheme in the world. The compounding effect achieved through regular investment and low-cost advantage provides an opportunity to accumulate a higher pension corpus during the working life.

In conclusion, it can be said that investing in NPS helps reduce one’s taxable income apart from building a pension corpus for post-retirement life. The NPS subscriber enjoys flexibility to contribute any amount above Rs 500 anytime and there are no restrictions on the number of transactions in any given year.