What is national pension scheme?

A year ago, my mom and I had a discussion about saving money, during which we talked about the National Pension Scheme (NPS). My younger brother came over and asked what is national pension scheme. I informed him, in India, NPS is a retirement savings plan supported by the government. People can save for their retirement through this voluntary, market-linked program. I have shared more details on it below.

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What is NPS Scheme?

The National Pension System is a savings plan in India that helps you save money for retirement. It's a flexible, investment-based plan that lets you put money aside regularly while you're working, and it also gives you tax benefits.

You can calculate the NPS using the below formula.

A = P × (1 + r/n) ^ (nt)

1. A = Final corpus

2. P = Monthly contribution (5000)

3. r = Annual interest rate (8%)

4. n = Number of times interest is compounded per year 

5. t = Number of years (30)

I explained to my younger brother, if you save 5,000 every month at 30, by the time you're 60, you could have around Rs.75,01,476 for your retirement. If you use 40% of that amount to buy a pension plan, you could receive a monthly pension of about Rs.20,004.

I hope this helps you understand what are NPS schemes.

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Are Pension Plan Contributions Tax Deductible?

National Pension Scheme is a retirement policy initiated by the Government of India to help out citizens facilitate a regular income after their retirement. Pension Fund Regulatory and Development Authority is the regulatory body of NPS. This is the meaning of what is National Pension Scheme in simple terms.

What is NPS: Features and Benefits

• NPS Trust ensures adherence to the regulations through strict monitoring.

• You can invest in your NPS account at any time, any amount.

• You can get a flexible plan to choose or change your Point of Presence, investment pattern, and fund manager. This makes sure that you can optimize your return according to your comfortability with various asset classes including Equity, Corporate Bonds, Government Securities and Alternate Assets and fund managers.

• It is one of the most beneficial and low-cost investment products available.

• NPS account or Permanent Retirement Account Number (PRAN) will remain unchanged even if you change your job and move to a different city or state.

• If you have an NPS National Pension Scheme then you can easily transfer your Superannuation funds to an NPS account without any tax implication.

• You can claim tax benefits with NPS accounts.

• You can claim up to 1.5 lakh for NPS if you contribute to NPS. This clause falls under 80CCD(1) which is a part of 80C.

• You can claim up to 10% of your salary under section 80CCD(1). The limit for the self-employed taxpayer is up to 20% of the gross income.

• 80CCD(2) covers the employer's NPS which is not a part of Section 80C. You cannot avail of this benefit if you are a self-employed person

I hope you know what is National Pension Scheme or what is NPS now.

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