NPS Scheme: Private sector employees often worry about their retirement, as unlike their government counterparts, they do not receive a pension after retirement. To address this concern, the government has introduced several schemes that encourage individuals to invest and secure their future during their working years. One such scheme is the National Pension Scheme (NPS), which allows individuals to invest and enjoy a monthly pension of ₹50,000 during their retirement years.
Introduction to the NPS Scheme for Private Sector Employees
The National Pension System is a long-term investment scheme introduced by the central government to ensure a regular income for individuals post-retirement. It is a contributory pension scheme operated by the government and is particularly beneficial for private-sector employees. By investing in the NPS, individuals can accumulate a significant retirement fund and receive a pension every month.
Eligibility and Investment Details of the Scheme
Any individual, whether employed in the private sector or as a partner, can open an NPS account in their name or their partner’s name. The NPS offers a combined benefit of a retirement fund and a monthly pension after the age of 60. Contributions to the NPS can be made on a monthly or yearly basis, starting from as low as ₹1,000 per month. The scheme allows contributions to continue until the age of 70, and after the age of 60, individuals can withdraw 60% of the accumulated funds while the remaining amount is used to provide a monthly pension.
Tax Benefits and Returns under the NPS Scheme
By investing in the National Pension Scheme, individuals can avail themselves of additional tax benefits. Contributions made to the NPS are eligible for an extra deduction of up to ₹50,000 under Section 80CCD(1B) of the Income Tax Act, apart from the existing deduction available under Section 80C. This helps individuals reduce their tax liabilities while building a retirement corpus. The NPS also offers attractive returns on investments, with an average return of 10% per annum, ensuring a substantial retirement fund.
Securing a Comfortable Retirement through the NPS Scheme
With disciplined and regular investments in the NPS, individuals can build a robust retirement corpus over time. For instance, if a 30-year-old individual invests ₹5,000 per month in the NPS and continues to do so for 30 years, assuming an average return of 10%, their NPS account can accumulate approximately ₹1.12 crore by the time they reach the age of 60. As per the NPS rules, they would be eligible to receive a lump sum of ₹45 lakh, along with a monthly pension of ₹45,000. Moreover, individuals can also withdraw 60% of the accumulated corpus at the time of retirement, providing flexibility and financial security.
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