6 strong reasons why you should never miss NPS in your tax planning
At Finbingo, we always favor low-cost & transparent financial products to young investors to help save tax and create wealth. In this context, one superb financial product we recommend is the National Pension Scheme, also known as NPS.
In this post, we tell you 6 strong reasons why you should start investing in NPS. So, grab a cup of coffee & read on…
Reason # 1: Every year, you get an additional tax deduction of up to ₹50,000
Consider this tax-saving as an “extra investment” towards your retirement corpus. In that case, this extra investment made over the next 25 -30 years can make a massive difference in your retirement fund. Another way of looking at it is that the tax-saving increases your take-home income & frees up money to invest in other tax avenues.
Reason # 2: Your money at maturity is 100% tax-free
Only the monthly annuity payments that you receive will be taxable. Even this income would qualify for the base tax exemption limit, which means that only a portion of it may end up getting taxed.
Over the years, the Government has made NPS taxation rules very much friendly & attractive for investors. This tax treatment puts it almost in the same league as PPF and EPF & makes NPS an attractive investment for a young investor.
Reason # 3: Long lock-in makes NPS a true-blue retirement investment:
NPS really helps you in compounding so that, unlike other investments, the money you invest in NPS is locked in until you reach 60 years of age. You may think this is a minus point. But no, it’s a blessing in disguise. Lock-in saves you from being tempted to spend your precious retirement savings on unnecessary expenses like buying expensive phones or splurging on vacations.
Remember: You can get a loan for almost every damn thing nowadays, but when you reach old age, no-one will give you a loan for your retirement. The amount you invest today in NPS may pinch you, but you will bless yourself for your wise decision when you become old.
Reason # 4: You are investing in a super low cost and highly regulated investment:
Also, NPS is very closely regulated and monitored by the regulatory body PFRDA. This means that at all times, your rights & interests are well protected. This is very important considering the long-term nature of investment & the critical nature of the financial goal that you’re saving your hard-earned money for.
Reason # 5: You get multiple fund management & asset allocation options:
Regarding fund manager selection, you can quickly look up each fund’s past performance to help you decide. Even after investing,, It is also effortless to switch funds online mid-way if you find a drop in performance.
As regards fund allocation, you get the freedom to choose between active & auto asset allocation. If you are an informed investor & know how markets work, you can plan the equity allocation, which can go up to 75%. However, if you are a passive investor, auto allocation balances your asset allocation automatically as per your age.
Reason # 6: You can invest online, from the comfort of your home:
When you open an NPS account, you get access to the online portal that you can use to manage your account online. In the portal, you can see an update on your account, download statements, check fund performance, make fresh investments, switch between funds.
No repeated calls to customer care, no visiting any offices… isn’t that great?