Advantages of National Pension Scheme | Know About NPS

Stressing that the old age traditional support system for retired people is increasingly eroding in India, Government highlighted on the need for making National Pension System universal.

Minister of State for Finance Jayant Sinha said that Indian equity markets are one of the most volatile markets in the world and if we will make our pension market smooth and steady, then volatility in equity market will be less and people will start investing more in stock markets. NPS was initially introduced for the central government employees joining on or after January 1, 2004. Retirement planning is often under-addressed by individuals, especially professionals. Most individuals contribute on relatively moderate provident funds but the long term products related to post retirement are not given due importance. Government came up with the National Pension System, on January 1, 2004 aiming to overcome these limitations by offering higher returns and tax benefits. NPS was made available to the centre govt employees. In 2009, it was made available to all the citizens. Later in December 2011, a customized version of NPS, Known as NPS Corporate Sector Model was introduced to facilitate the organised entities including public sector organisations. Government's NPS-corporate Model will provide a platform for the employers of corporate and public sector entities to extend the old age social security benefits to their employees. Also to co-contribute for employee’s pension, with flexibility in the amount of contribution from employee or employer. MoS Finance, Jayant Sinha reiterated government's Sabka Saath Sabka Vikas mission and added that the government is committed to extend the pension benefits to all. Let's first understand the advantages that NPS creates for investors: Advantages of NPS : • Both Employee and Employer can avail tax benefits under the scheme. The Employee can save tax on his contribution under 80CCD(1) as well as the contribution made by employer under 80 CCD(2) Employer can also claim tax benefits for his contribution as business expenses. • The additional tax deduction of Rs.50,000 for investments done in NPS. • It would now be offered as an alternative benefit to the employees besides EPF. • It is one of the lowest cost pension schemes in the world. • It is portable i.e. can be managed and operated from any part of the country. • It offers flexibility of choice of pension fund manager. NPS is an alternative besides EPF. Under NPS, the following types of account are available: •Tier-1 Account Employee /Employer can contribute for retirement into this non-withdrawal account. •Tier-2 Account This account is a voluntary savings facility, where the subscriber can avail fund management facility at very low cost. Subscribers are free to withdraw amount from this account as per their wish. The NPS Model allow all three variations of contribution from employer and employee: •Unequal contributions by the employers and employee •Contribution from either the employer or the employee National Pension Scheme is an opportunity for all to invest for their old age and also avail the tax benefits. It also fulfills the Government's mission of providing universal social security to all.