New Delhi, Business Desk. Government-backed National Pension System (NPS) is a better investment option for creating retirement funds. It is managed by the Pension Fund Regulatory and Development Authority (PFRDA). The special thing is that in this system, the subscribers also get the benefit of income tax exemption. If we compare NPS with other assets of this category, it proves to be the best because of its many attractive features. A major feature of NPS is that there is no maximum investment limit. At the same time, minimum annual investment of Rs 1,000 is required to keep the NPS account operational.
This pension scheme is available to people between 18 and 65 years of age. Subscribers in NPS are required to contribute at least once in a financial year. NPS consists of two types of accounts. Tier-1 and Tier-2. Tier-1 account is the default account for tax benefit purpose. At the same time, Tier-2 account is optional. Let us know what are the benefits of NPS.
1. Investors get considerable flexibility in NPS. NPS subscribers can choose their own investment options and pension funds and watch their money grow.
2. Investors can change the investment option or asset class twice a year. Also, you can change the pension fund once a year.
3. NPS gives you two approaches to invest in your account. First active and second auto. Subscriber in Active Choice can set allocation percentage in assets classes. At the same time, the fund is automatically allocated among the asset class in the pre-defined matrix, based on the age of the subscriber in Auto Choice.
4. The scheme offers dual benefits with low cost and power of compounding.
5. One good thing about NPS is that it has an annuity amount assured. An annuity refers to the monthly payment that you will receive as a subscriber from the Annuity Service Provider (ASP) upon exit from the National Pension Scheme.
6. Subscribers can claim for tax-saving benefits under three sections of the Income Tax Act on investment in NPS. These three sections of the Income Tax Act are section 80 CCD (1), section 80 CCD (2) and section 80 CCD (1B).
7. NPS account can be managed online.
8. You can easily calculate your NPS pension using the pension calculator available on the National Pension System Trust (NPS Trust) website.