NPS Rules: NPS is a voluntary and long term investment plan for retirement, which comes under the purview of Pension Fund Regulatory and Development Authority and the Central Government. You can start an account in it from the age of 18 years.
NPS Calculator: National Pension System is a voluntary and long term investment plan for retirement, which comes under the purview of Pension Fund Regulatory and Development Authority (PFRDA) and the Central Government. This pension scheme can be joined from the age of 18 years. But this is not possible for everyone. It is possible that you started your job at the age of 22 or 23 years. It is also possible that many people are not able to give priority to retirement at the beginning of the job. In such a situation, even if there is some delay, investing in this scheme in a disciplined manner can make your life better on retirement.
You can make a big plan even with a small amount
Suppose you started working at the age of 23 or 24, then by the age of 25, you start becoming stable in your job. From where you can also plan investments with small amounts. The good thing about NPS is that no matter how much amount you start this scheme with, it has a facility like SIP top up, through which you can increase the investment amount by a fixed percentage every year. That is, as your income increases, you can give a booster of top up (NPS TopUp) to your National Pension Scheme.
If you join NPS at the age of 25 and start with a monthly investment of Rs 3500. At the same time, if you keep doing a top up of 5 percent every year, then the lump sum amount you get on retirement can be Rs 1.50 crore. While along with this, you can also arrange for a pension of Rs 1 lakh every month.
NPS: How to invest?
Age to join pension scheme: 25 years
Scheme: Active Choice
Investment in NPS every month: Rs 3,500
Top up investment after every year: 5%
Your total investment in 35 years: Rs 37,93,453
Estimated return on investment: 12% annually
Total corpus: Rs 3,09,23,608 (about Rs 3 crore)
Total benefit: Rs 2,71,30,155 (Rs 2.71 crore)
Investment in annuity plan: 50%
Annuity rate: 8%
Pension wealth: Rs 1,54,61,804 (about Rs 1.55 crore)
Lump sum withdrawal amount: Rs 1,54,61,804 (Rs 1.55 crore)
Monthly pension: Rs 1,03,079 (about Rs 1 lakh) Rs.)
NPS Tax Benefit: Tax benefits
Under section 80CCD (1), contributions up to a limit of Rs 1.5 lakh for Tier I investments are eligible for tax deduction under section 80C. While in addition to the deduction under section 80CCD 1(B), subscribers are allowed a deduction of up to Rs 50,000 for Tier I contributions.
Under section 80CCD (2), employer contributions for Tier I investments are eligible for deduction up to 14 per cent for central government contributions and up to 10 per cent for others. This deduction is over and above the deduction limit applicable under section 80C.
NPS: Understand the risk factor too
The limit on equity exposure for NPS accounts is 75% to 50%. For government employees, this limit is 50%. In the prescribed limit, the equity portion will be reduced by 2.5% every year starting from the year in which the investor turns 50 years of age. However, the limit is fixed at 50% for investors aged 60 years and above. This stabilizes the risk-return equation in the interest of investors, which means that the corpus is somewhat protected from the volatility of the equity market. At the same time, the earning potential of NPS is higher than other fixed income schemes.
