What is NPS Account and is it good to invest in it?

What is a NPS Account?

NPS stands for National Pension System. It was formed in the year 1999 by the Government of India to help people save money in a systematic way to use after their retirement. It is a voluntary entity which is defined contribution retirement savings scheme. It works in order to protect the volunteers that subscribed to the scheme/system by giving them higher returns and higher interest.

Types of National Pension Scheme funds

There are 3 types of NPS funds out of which the volunteer subscriber can choose from; they are as follows:

➢      Government securities

➢      Equities

➢      Corporate funds

Why is it good to invest into National Pension Scheme?

•    Unbelievable Tax Exemptions

Under the national pension system, the subscriber is subject to a lot of tax benefits and tax deduction through the sections in the Income Tax Act in India. Here are the 3 sections under which tax benefits in NPS become possible:

Section 80 C C D - 1

A tax exemption of INR 1.5 lakhs or less can be made.

Section 80 C C D - 2

A tax exemption of 10 % of your basic salary (invested into the national pension scheme) can be made.

Section 80 C C D – 1 B

A tax exemption of up to INR 50,000 (voluntary contributions into the National pension system scheme) can be made.

•    Make your NPS account

You are provided with a PRAN after you invest your money or funds into the national pension system scheme. The PRAN is your Permanent Retirement Account Number. This is given through the Central Record Keeping Agency which is short formed as the CRA. This digital age has made possible the ease of making the transactions online which can be done in this case with just identification and password.

•    Returns are high

A higher return can be achieved by investing in the tier 2 accounts of the national pension system scheme. The high returns are possible because the money has been accrued over a long period of time till the age the individual retires. If they start investing into the national pension system scheme earlier, they will have higher returns as the money will be invested for a longer time. The funds that are invested into tier 1 accounts also provide with a return for the investors.

•    Invest really low into your NPS account

Accounts in tier 1 can be opened at a really nominal amount which makes investing into the national pension system scheme so amazing. You do not need to worry about outing in huge sums of money just to get started with saving for your post - retirement savings. The tier 1 NPS account can be opened with a super low investment of INR 500 whereas the tier 2 accounts need to have INR 1000 to get opened. There are 3 ways to deposit this money to get your tier 1 and tier 2 national pension system schemes started up, they are as follows:

o      Cash

o      Cheque

o      Demand Draft

Accessible by

This national pension system scheme plan is available to invest into for both Indian residents as well as non - resident Indians (NRIs). An individual between the ages of 18 years to 60 years is eligible to invest into the national pension system - NPS.

•     Can open multiple accounts

An investor who is investing into the national pension system scheme plan can do so in multiple options. When investing, the tier 1 is a mandatory to invest into as it is the basic savings plan and there is also a tier 2 which is an optional investment account which one can use their judgement to see if they want to invest into or not. The more areas you invest into, the higher the possibility of the returns, as if there were to be any risk in the investments, the risk are split across too.

•     Easy on your pockets

Investing into the national pension system scheme plan is super light on you as well as your pockets as it does not drain out much of it. It is an extremely cheap plan, to begin with. The national pension system plan is one of the cheapest pension plans in the country. To get a onetime enrollment, you only have to give INR 125. The fees for this is 0.35 % for every financial transaction which has a minimum limit set to INR 20 and the upper limit as to what the maximum can be is INR 25,000. To open yourself an account, you just need to pay INR 50. Fund management rates are usually though to be high as managing that significant amount of fund is one of the most difficult tasks, but the fund management charge is 0.01 %.

•     Funds invested into

All the funds that are invested in by proper functional organizations are systematic. All of the funds that have been collected by the investors have been qualifies, experiences fund managers. The funds which are put it have approved investment guidelines. All the funds that re invested in by the investors are regulated PFRDA or the pension funds regulatory and development authority. The funds are probably invested into government securities, corporate shares, debentures, bills.

Invest into the NPS account - national pension system scheme plan account and get all the benefits when you retire through systematic saving systems. Get your funds to the NPS account and get the highest returns on the lowest prices. The NPS account is a great tool to systematically save your money into an account that will be functional for use for the individual’s post retirement.