New Delhi: NPS is one of the most popular investment options to build a retirement corpus. Administered by the Pension Fund Regulatory and Development Authority (PFRDA), this government-backed scheme is a voluntary investment plan for public, private and unorganised sector employees. The NPS scheme encourages investor to invest in pension account at regular intervals.
Under NPS, individual savings are pooled in to a pension fund which are invested by PFRDA regulated professional fund managers as per the approved investment guidelines in to the diversified portfolios comprising of Government Bonds, Bills, Corporate Debentures and Shares. These contributions would grow and accumulate over the years, depending on the returns earned on the investment made.
NPS annuity:
At the time of NPS account opening, the account holder is given two options — active and auto mode. Apart from this, the account holder has the option to choose how much of the maturity amount they would like to invest for annuity. This percentage of annuity buy decides the amount of pension they would get.
As per the NPS rules, it is mandatory to buy annuity from at least 40 per cent of the net NPS maturity amount. However, there is no cap if someone wants to raise this limit. One can buy annuity using 100 per cent of thir NPS maturity amount.
How much to invest monthly to get Rs 1.5 lakh pension?
If a person invests Rs 15,000 in NPS account for 30 years, then assuming 12 per cent return on investment and 6 per cent annual return on annuity, one’s total corpus at maturity after 30 years will be Rs 5,29,48,707. If the investor buys annuity worth 60 per cent of the maturity amount, the NPS calculator shows that that the investor will get Rs 1,58,846 monthly pension. The Lump sum value in this case will be Rs 3,17,69,224 while the annuity value will be Rs 2,11,79,483.
NPS calculator:
Note: This pension calculator illustrates the tentative Pension and Lump Sum amount an NPS subscriber may expect on maturity or 60 years of age based on regular monthly contributions, percentage of corpus reinvested for purchasing annuity and assumed rates in respect of returns on investment and annuity selected for.
NPS tax benefits:
An NPS account holder can claim income tax exemption on up to Rs 2 lakh investment in single financial year — up to Rs 1.5 lakh under Section 80C and an additional Rs 50,000 under Section 80 CCD of the Income Tax Act.
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