NPS Rule: National Payment System was started for government employees in the year 2004. In the year 2009, it was opened for all sections.
National Pension System (NPS) is an excellent investment option for retirement fund and monthly pension. By investing in NPS, you can not only secure your retirement but also avail tax exemption. In NPS, the investor gets a lump sum amount after retirement and along with it, he also gets the benefit of monthly pension. The special thing is that there is no tax on the amount received on maturity. If you think that investment can be made in NPS only during the job, then you are wrong.
According to the new rules, investment in NPS can be continued even after retirement. The Pension Fund Regulatory and Development Authority (PFRDA) has made several changes to make NPS more flexible. Now investment can be made even between the ages of 60 and 65, and the subscriber can continue contributing to NPS till the age of 70.
60% can be withdrawn on maturity
The entire fund cannot be withdrawn from NPS on maturity. 40 percent of the total fund is mandatorily used for annuity, which provides pension after retirement. The remaining 60 percent amount can be withdrawn in lump sum. If you do not want to withdraw your NPS deposits even after retirement, the government allows you to do so.
You get tax exemption
Investing in NPS also gives the benefit of tax exemption. You are entitled to tax deduction under sections 80CCD(1), 80CCD(1B), and 80CCD(2) of the Indian Income Tax Act, 1961. An additional deduction of up to Rs 50,000 can be availed on investment in NPS under section 80CCD(1B), which is in addition to the tax exemption of Rs 1.5 lakh under section 80C.
Types of NPS accounts
There are two types of accounts in NPS: Tier 1 and Tier 2. Tier 1 account is a retirement account, in which certain conditions apply for withdrawal of money. On the other hand, Tier 2 account is like a savings account, from which you can withdraw money without any restrictions.
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