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NPS is a pension saving scheme with defined contributions and is designed to offer systematic savings over a long period of time. National Pension System scheme is governed by Pension Fund Regulatory and Development Authority (PFRDA) of India.
The scheme inspires working individuals to invest regularly in a pension account, to allow them to withdraw a certain amount of accumulated sum once they are retired. The remaining sum is offered as a monthly pension to the retiree.
In this post, we will discuss the pros and cons and other NPS scheme details to help you understand the plan better.
NPS is a market-linked product of defined contribution. Under this scheme, the subscribers are allotted a unique PRAN or Permanent Retirement Account Number. This number is created and maintained by the CRA or Central Recordkeeping Agency for subscribers. Tier-I and Tier-II are two types of NPS accounts.
Under NPS, employees are encouraged to invest at regular intervals. Once the NPS lock-in period is over, the investor can withdraw an amount of money from the corpus saved, while the rest of the amount can be availed by the account holder as a monthly pension after retirement.
Here are some pros of National Pension System accounts as mentioned below for you to see if the account suits your appetite.
Even self-employed account holders can claim tax exemption similar to that of salaried people under section 80CCD (1B) and under section 80C. They can also invest over 20% of their gross annual income to claim tax exemption under section 80CCD (1).
There are some disadvantages of National Pension System scheme as mentioned below:
The Pension Fund Regulatory and Development Authority (PFRDA) is the controlling body for the complete administration and guidelines of pensions in India. The authority has chosen Protean eGov Technologies Ltd. (formerly NSDL e-Governance Infrastructure) as the CRA or the Central Recordkeeping Agency for NPS-Lite.
Subscribers are required to generate an IPIN using PRAN to log in to the NSDL portal. They can use the NPS CRA login to generate this IPIN. Here are the steps to generate IPIN:
Your IPIN will be generated. Log in to the NSDL portal using this IPIN
Several reasons make the NPS or National Pension Scheme worth investing including tax benefits, flexible contributions, low cost, flexible annuity, and security. For people looking at ideal investment options to save enough for retirement as well as to secure their financial future, NPS is the best option.
Here are some benefits of the scheme:
It is important to choose a good NPS fund manager for investment in your NPS account. Below are the NPS fund managers which can be considered for best NPS funds:
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Yes, NPS does make for a good retirement savings scheme and worth investing. Though, it may not be the best scheme to invest in if you aim to save for some specific purposes like children's education, marriage etc. However, for other needs, a PPF serves as the best scheme of investment.
Yes, you can invest in both NPS and PPF.
Any Indian citizen in the age group of 18-60 years can open an NPS account.
Normal exit is allowed after completion of 3 years of NPS scheme.
If you do not wish to continue your NPS account or defer your withdrawal, you can exit from NPS anytime.
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