The best way to predict your future is to invest in it.
At a point when individuals retire they will either have no or very little monthly income. This means that, you have to alter your lifestyle. Coming to think of it, it’s actually difficult to compromise on your comforts and expenditure.
As a solution, opting a pension scheme would help you to save a good corpus for your old age, thus providing financial security and freedom. One such scheme that we will discuss today is the National Pension System (NPS).
The National Pension System is a Government initiative, with an intention to provide pension opportunity to every Indian (Resident or Non-Resident) and to inculcate the habit of saving specially for retirement. It was rolled out on January 2004 for new Government recruits and has been made mandatory for all central government employees and some state government employees. This scheme is not compulsory for Government Employees who have joined before January 2004, however they can always opt for it if they want to. As for the private sector employees, they are given a choice to choose between Employees’ Provident Fund Organization and NPS.
Any person between the age of 18 – 65 years can open an NPS account.
There are two types of schemes under NPS: Tier 1 and Tier 2. Let’s dive deeper into both of them:
It is a mandatory account for all those who opt for NPS. It has different implications depending on the category you belong to:
This is not a compulsory account like Tier 1. This account allows high liquidity as funds can be withdrawn any time. There are no contributions from the government or the employers in Tier 2 and include no tax exemptions either. There are three important points to make note of:
If you retire at 60:
If you retire before 60 years:
Remember that the amount via annuity is taxed according to your tax slab. In the event of the account holder’s death, the entire amount is given to the nominee.
One can invest in NPS through Fund Managers. Here is the list of Pension Fund Managers:
These fund managers invest funds in varying proportions of equity, corporate debt and government securities out of which:
The two investment options available are:
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You can open an NPS account with:
All you need is:
Hopes these details help you in your journey with NPS. After all, we all want to say:
“Finally retired : Goodbye Tension, Hello Pension. “
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