Should I invest in NPS?
NPS or the National Pension Scheme is relatively a recent introduction by the government. The NPS helps individuals to plan for their retirement income. Being a long term need it encourages people to invest into NPS from an early age by also giving tax benefits while you invest.
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* – If you are salaried, upto 10% of your salary can be invested into NPS. There is an additional deduction available for NPS to the extent of Rs 50,000 which is over and above the limit of section 80C.
* – NPS is a low cost scheme that allows you to choose how the funds are invested. You can invest both in equities and also safer debt instruments. The equity exposure is capped to 50% for investors, which reduced the flexibility.
* – One needs to keep in mind that NPS is has restrictions on withdrawals. One can withdraw amounts for specific needs.
* – After 60 years, 60% of the corpus can be withdrawn in lump-sum. This has now been made tax free. The pension that you receive is taxable.
* – NPS is definitely and option to consider as part of one’s pension planning. It provides tax benefits on investing and is a very low cost scheme. On the flip-side keep in mind that the scheme is not as flexible as avenues like Mutual Funds and liquidity is poor.
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