Financial Services Why we Should invest in NPS just for the tax benefits?

Why we Should invest in NPS just for the tax benefits?

Why we Should invest in NPS just for the tax benefits?

Why we Should invest in NPS just for the tax benefits?

  • “Since the Income Tax Act introduced a new deduction of $50,000 under Section 80CCD, NPS has grown in popularity (1b). This deduction is in addition to the 1.5 lakh deduction granted under Section 80C.
  • As a result, investment in National Pension Scheme plans can result in a tax deduction of up to $2 lakh."
  • The National Pension Scheme helps investors save lump-sum sum for their retirement. This is Apart from tax savings,
  • "The National Pension Scheme (NPS) is a retirement-oriented plan that provides monthly pension payments as well as a lump sum payment when the investor reaches retirement age.
  • This plan not only saves money on taxes, but it also ensures a comfortable retirement for investors. This system has extended the benefits of the monthly pension enjoyed by government employees to others such as employees, freelancers, and self-employed individuals, among others."
  • An investor with a high risk tolerance can put up to 75% of their money in the stock market. Because the investment is market-linked, it provides long-term returns that outperform inflation.
  • This is one of the best tax-saving investment options because it invests its corpus in equity and debt segments based on the risk appetite of the investor.
  • However, it has been found that when it comes to investing in NPS, many people confuse it with the Public Provident Fund.
  • Normally People compare National Pension Scheme & Public Provident Fund investments before deciding between the two.
Criterion PPF NPS
Safety High Low
Returns Moderate High*
Liquidity Low Low
Taxation Fully exempt Low**

*High return potential due to long holding period, if the portfolio has sufficient equity allocation.

**40% of NPS is tax-free so the overall rate on NPS is low.

  • The National Pension Scheme provides an annuity option, which makes it more appealing. People who are self-employed or have another source of income can also open an National Pension Scheme. Also, while Public Provident Fund is purely fixed income,
  • National Pension Scheme allows you to invest up to 60% in equity, whereas Public Provident Fund is purely fixed income, so in a growth environment like last year, a Public Provident Fund investor would have made a fixed return of 7.1 percent, while an NPS holder with 50% equity exposure would have made 25%+ returns. Fund managers might dynamically convert to more debt-like securities in riskier times and auto mode, giving returns on par with PPM,
  • National Pension Scheme account maintenance charges are relatively cheap, and benefit of accumulated pension wealth to subscriber timely becomes significant.

Disclaimer: The content of this post isn't considered to be professional or legal advice, We aren't responsible for any damages arising from your access to the location content & must not be relied on or used as a substitute for legal advice from a lawyer professional in your jurisdiction. CARajput is among India's big digital compliance services platform which committed to helping people have started & developed their businesses. We had started with the goal of creating it easier for start-ups to start out their business. Our main aim is to assist the businessman with applicable laws & regulations compliance and providing support at each & every level to make sure the business stays compliant and growing continuously. For any query, help or feedback you may in touch on or Call or what’s-up on 9-555-555-480

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