How NPS can help you after retirement and its benefits?

1. How NPS can help you after retirement and its benefits? The ​National Pension System (NPS) ​was introduced by the Government of India to give individuals an avenue to save for their retirement. The scheme is designed to create a retirement corpus over the active working life of the investor. Thereafter, on retirement, NPS promises lifelong incomes which provide the investor with the much-needed source of income. NPS is a market-linked saving scheme wherein the investments that you make are invested in the market through the funds offered by the scheme. There are two types of NPS accounts called the Tier I Account and the Tier II Account​. While the Tier I account is compulsory, Tier II is voluntary and you can open one or both the accounts with your investments. Tier I Account does not allow withdrawals before maturity except in specific instances while Tier II Account is flexible and investments can be withdrawn whenever needed. Now that you know the basics of NPS, let’s understand the benefits offered by the scheme. NPS benefits 1. The minimum investments required to open an NPS account is INR 500. This makes NPS investments affordable and accessible by all 2. You can invest in an NPS scheme through your bank account because almost all leading banks are registered with the Pension Fund Regulatory and Development Authority (PFRDA) to offer NPS subscriptions to their customers 3. You can choose to invest in equity, debt, or both through the four fund choices offered by the NPS scheme. You can also manage your investments yourself through the Active Choice investment strategy or opt for Auto Choice strategy wherein your investments are allocated to specified funds in a specific ratio depending on your risk appetite and age. 4. Tax-free partial withdrawals of up to 25% are allowed by Tier I NPS Account so that you can take care of important financial needs 5. The investments that you make to the National Pension System qualify for a deduction under Section 80 CCD (1) which includes deductions under Section 80 C and the deduction limit is INR 1.5 lakhs. Moreover, an additional contribution to the NPS scheme, up to INR 50,000, is allowed as an additional tax deduction under Section 80 CCD (1B) over and above the deduction under Section 80C. If you are a salaried employee, your employer’s contribution to the scheme, limited to 10% of your salary, would also be allowed as an additional deduction under Section 80 CCD (2). This deduction would be allowed even under the new tax regime where all other deductions are disallowed. How NPS help you after retirement? Besides giving the above-mentioned benefits, the main aim of the NPS scheme is to create a retirement corpus for you from which you can avail lifelong incomes. So, let’s understand how NPS helps after you retire – ● Maturity of the scheme:

2. The NPS scheme matures when you attain 60 years of age. On maturity, you can defer the maturity date by another 10 years if you want to generate higher returns. Once the plan matures, a lump sum corpus is created. You have two options on maturity which are as follows – 1. You can use the entire accumulated corpus to receive annuity incomes 2. You can withdraw 60% of the corpus in cash which would be tax-free in nature and use the remaining 40% to receive annuity incomes Thus, on maturity, the NPS scheme gives you a lump sum corpus for meeting immediate financial needs and also promises annuity incomes. ● Annuity incomes To create a source of income in your old age, the National Pension Scheme offers you annuity incomes throughout your life. There are different annuity options to choose from and you can also choose to receive the annuity income monthly, quarterly, half-yearly, or annually. The available annuity options are as follows – a) Uniform rate of annuity payable lifelong b) Uniform rate of the annuity payable for a guaranteed period of 5, 10 or 20 years, as per your choice, and thereafter for your whole life c) Uniform rate of annuity payable lifelong and return of the purchase price in case of death d) The increasing amount of annuity payable lifelong where the annuity increases by 3% simple rate of interest every year e) Uniform rate of annuity payable lifelong. On your death, half of the annuity would be paid throughout your spouse’s lifetime f) Uniform rate of annuity payable lifelong. On your death, the annuity would be paid throughout your spouse’s lifetime g) Uniform rate of annuity payable lifelong. On your death, half of the annuity would be paid throughout your spouse’s lifetime. Moreover, on the death of the spouse, the purchase price would be refunded Creating a legacy ● The annuity incomes promised above not only help you meet your lifestyle expenses after you retire but also help your spouse lead a financially independent life in case of your premature demise if you opt for a joint-life annuity. Moreover, under annuity options ‘c’ and ‘g’, the corpus of your NPS account which you used for receiving annuities is refunded back on death. This allows you to leave behind a legacy for your family. Conclusion Thus, the NPS scheme is a multi-faceted investment scheme. It allows you to create a fund for retirement, offers good returns through market-linked investments, gives tax benefits, and also helps you post-retirement. So, open an NPS account and keep your retirement worries at bay.