The Corona epidemic has taught the world a lesson that whatever we earn today, some part should be saved for the future. In the youth system, people manage to survive in some way or the other, but after retirement, it becomes very difficult to survive without money. In this situation, the risks to longevity and family circumstances have become difficult to ignore. Despite this, a large number of people are not planning for retirement. By the time they realize their need it is too late. In the current situation, National Pension System (NPS) is the most attractive scheme among the options available in the market for retirement. In this, you can arrange pension for old age by depositing a minimum of Rs 1,000 every year. If you have the capacity, a higher amount can also be deposited. People who deposit more amount in NPS at younger age will get more pension accordingly. In this way, NPS can be used as a support for a prosperous and happy life after retirement.
Change increases attraction
Before the year 2004, the responsibility of paying pension to central employees was of the government. In return, the financial burden on him was continuously increasing. To reduce this, the government introduced NPS. In this, a fixed amount of contribution was ensured from the employees' salary. The government is contributing the same amount from its own side. Many such features were added to NPS so that it becomes a popular retirement option and people are forced to adopt it for personal retirement. Although when this scheme was launched, there were some flaws in it but the government removed them by changing the rules from time to time. Due to this the attractiveness of NPS is increasing. In the latest change, pension regulator PFRDA has changed the age limit for entry and exit in NPS. Under the new rules, people up to the age of 70 years can join NPS. Earlier this limit was till 65 years. In this way it has been made more useful for customers after the age of 65 years.
benefit to old customers
Under the new system, customers who have closed their NPS account can also take advantage of the new rules. This means that now after 65 years, till the age of 70 years, they can also open a new NPS account. If a customer joins NPS after the age of 65 years and chooses to invest under the default auto choice, then he can invest only 15 percent of the funds in equity. Under this option, 75 to 90 percent of the funds will be invested in government securities. Similarly, under Active Choice, now up to 50 percent of the funds can be allocated in equity. If a person joins NPS after 65 years, he can exit after three years. Under the new rules, the account holder will have to use at least 40 percent of the funds to purchase annuity. The remaining amount can be withdrawn in lump sum. Exiting NPS before three years will be considered as ‘premature exit’. In this situation the shareholder will have to use minimum 80 percent of the fund for annuity. If a person wants to exit the scheme prematurely and his fund is less than Rs 2.5 lakh then he can withdraw the entire amount added in one go. In this way, there has been a lot of relief on the exit front from the scheme.
Helpful in saving income tax
NPS is a great scheme to save income tax. A salaried individual can claim tax deduction on contribution up to 10 percent of his basic salary in NPS. But this benefit will be available only on investment up to a maximum of Rs 1.50 lakh, which also includes life insurance premium, share of principal in home loan EMI, contribution to NSC, PPPF etc. If you have a private business, you can deposit up to 20 percent of your gross income in Tier-1 account. Government employees can claim tax deduction on investment up to Rs 1.5 lakh in Tier-2 account which will come under section 80C. Whose lock-in period will be of three years. There is a provision for additional special deduction on investment of Rs 50,000 in NPS which will be above the prescribed limit of Rs 1.5 lakh. The special thing is that the limit of 10 percent of salary or 20 percent of gross income does not apply to this additional contribution. There is no limit on investment in NPS but income tax exemption will be available only within the prescribed limit. In this way, NPS can prove to be very helpful in living a prosperous and happy life after retirement. To make the scheme attractive, the government made some minor changes in it, which we will mention later.
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