Several changes have been made recently to make the National Pension System (NPS) attractive. According to experts, NPS is a better option to meet post-retirement needs.
For the convenience of investors, the government has given various exemptions, including a lump sum withdrawal of up to Rs 5 lakh. Apart from this, the tax exemption available on investment in it makes it more attractive.
full withdrawal discount
If the total investment in NPS is up to Rs 5 lakh, then he can withdraw it in a lump sum. There is no condition of taking any annuity for this. Earlier this limit was Rs 5 lakh. Apart from this, one can start investing in NPS even at the age of 70. Whereas earlier this limit was 65 years.
double tax exemption on investment
Investment in NPS is eligible for an exemption of up to Rs 1.50 lakh under section 80C of Income Tax. Apart from this, you can also claim an additional tax exemption of Rs 50,000 on investment in this. In this way, investment in NPS provides tax exemption of up to Rs 2 lakh, which is the highest among any investment option.
60 percent tax free on maturity
Withdrawal after maturity in NPS is tax free i.e. 60 per cent of the total deposit. Whereas, the annuity of 40 percent of the amount that is to be taken is taxable only on the profit. In this also, there is no tax on the amount up to Rs 1 lakh and the amount above that is taxed as per your income tax category. In this respect it is similar to equity fund.
how much pension will i get
If the total deposit in your NPS is Rs 50 lakh and you decide to take an annuity of the total amount, then you will get a pension of Rs 5 lakh every year at an estimated interest of nine to ten percent. But the interest rates depend on the basis of the scheme. Similarly, you can get an annual pension of Rs 2.50 lakh to Rs 3 lakh at an estimated interest of five to six per cent. In such a situation, you should try to invest more and more capital in NPS so that you get more pension.
It is more beneficial to take NPS first
If you invest Rs 25 lakh in NPS at the age of 60 years and withdraw it after completion of minimum investment tenure of three years in 63 years, then your total deposit will be Rs 30 lakh at 6 per cent estimated interest. In this, 40 percent i.e. an annuity of Rs 12 lakh will have to be taken, on the basis of which the pension will be decided. If the remaining Rs 18 lakhs remain in NPS till the age of 75 i.e. for 15 years, then you will have Rs 43 lakhs tax free at 6 per cent estimated interest.
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