National pension scheme (NPS), government-sponsored pension scheme, was started in January 2004 for government employees. It was opened for all classes in 2009. It was started with the aim of providing retirement income to all citizens. A customer can contribute regularly to the pension account during his working life. In a lump sum, a part of the corpus can be withdrawn and the remaining funds can use an annuity purchase to secure regular income after retirement.
Let’s tell you in detail about NPS benefits but before that, you will tell about the National Pension Scheme.
During the old age, financial security and stability are given at the time of pension, when people have no regular source of income. It is ensured by the retirement plan that people have the opportunity to live an established life and maintain their living standards without any agreement in the growing years of their age. The pension scheme provides an opportunity for people to invest and save their savings, which can give them a lump sum as a regular income in the form of the annual plan at the time of retirement.
What is the national pension system
On October 10, 2003, for the development and regulation of the pension sector in the country the Government of India established the Pension Fund Regulatory and Development Authority (PFRDA). National Pension System (NPS) was started on 1st January 2004 for the purpose of providing retirement income to all citizens. The goal of NPS is to establish reforms in pension and promote the habit of saving for retirement among citizens.
Initially, NPS was started for the new recruits in the government (besides Armed Forces). Later, on the voluntary basis, the unorganized sector workers have been provided to all the citizens of the country.
Profit from NPS
The benefits received from NPS are as follows:
1-NPS is a transparent and cost-effective system in which pension contribution is invested in pension fund schemes and employees can know the value of the investment on a daily basis.
2- All the account holders have to open an account in their nodal office and have to take a fixed retirement account number (PRAN).
3-Every employee is identified with a specific number and has a separate PRAN which is portable, i.e. it remains the same even when transferred to any other office of the employee.
4-NPS is regulated by PFRDA with transparent investment standards and with regular monitoring and performance review of the fund manager by NPS
Tax benefits from NPS
Currently, tax exemption for the contribution made in Tier 1 account is exempt (EET) i.e. eligibility for deduction from gross total income up to the limit of Rs. 1.00 lakh on the full subscription amount (with other specified investment) Section 80C According to the provisions of the Income Tax Act, 1961, which are amended from time to time).
The amount used by the subscriber to buy an annuity and the price on the subscription is not eligible for the increase. The money taken after only 60 years of age by a subscriber i.e pension account holder is taxable.