If you are serious about saving, you must have heard about the NPS scheme. NPS stands for the National Pension System. Investing in this scheme secures your retirement and ensures a steady monthly pension.
A key benefit of this investment scheme is that it not only provides financial security after retirement but also offers tax exemptions. Additionally, a significant amount can be accumulated based on your investment. Another advantage is that the lump sum amount received after maturity is tax-free. Now, the government has made this scheme even better, allowing individuals to continue investing not only while employed but also after retirement.
New Rule for NPS Investment After Retirement
As per the new rule, retired individuals who wish to continue investing in NPS can now do so. The Pension Fund Regulatory and Development Authority (PFRDA), which manages this scheme, has introduced several improvements. Now, individuals between the ages of 60 to 65 can invest in NPS, with the option to continue investing until the age of 70.
Withdrawal Rules: 60% Can Be Withdrawn
Investors cannot withdraw the entire amount after investing in NPS. According to the rules, 40% of the total amount must remain in the fund for annuity purposes, which provides a pension after retirement. However, the remaining 60% of the amount can be withdrawn at once. Those who prefer not to withdraw even after retirement are now allowed to keep the full amount invested.
Tax Benefits Under NPS
NPS also offers tax benefits to investors. Depositors can claim tax exemptions under sections 80CCD(1), 80CCD(1B), and 80CCD(2). Under section 80CCD(1B), an additional exemption of up to INR 50,000 can be availed, apart from the deductions allowed under section 80C.
Types of NPS Accounts
NPS offers two types of accounts:
- Tier 1 Account – This is the primary pension account, where withdrawals are allowed only under specific conditions.
- Tier 2 Account – This functions like a savings account, allowing withdrawals without any restrictions.