People in the workforce have a variety of options at their disposal to save for retirement. Everyone hopes they won't need help financially from family or friends in their golden years. This is why employees often set aside a portion of their pay to put toward future investments. The government offers a wide variety of investment programmes in which citizens may safely place their savings for the long term. The National Pension Scheme or commonly known as NPS is one such government programme. That's why it's the best choice for your retirement savings.
After age 60, participants who deposit Rs 6,000 per month in the programme would be eligible for a pension of Rs 50,000. That means, you have to put money into this plan by setting aside two hundred rupees every day. Investors in this plan are excluded from paying income taxes. A participant in the NPS may deduct contributions of up to Rs 50,000 from their taxable income in addition to the refund received under Section 80C.
The NPS is seen as an investment for the future. You make contributions to the plan throughout your working years, and the funds are distributed to you as a pension when you leave your employment. The investor has a few of options for withdrawing their NPS funds. The first is that you'll only be able to access a fraction of your total investment at any one moment, with the rest going straight into your pension fund. This sum will be used to buy an annuity. When you retire, your pension will be proportional to the amount of money you leave to purchase an annuity.
Accounts come in two types
The National Pension Scheme (NPS) has two account tiers: Tier-1 and Tier-2. Those who haven't yet deposited their PF but are planning for retirement should open a Tier-1 account. The opening deposit for this account is 500 Indian Rupees. It's possible to take out as much as 60% of the balance annually after you're retired. The remaining forty percent is invested in a purchase.
What is the amount of tax exemption available?
Income tax exemptions of up to Rs 1.5 lakh are available to NPS account holders under Section 80C, and an additional Rs 50,000 is available under Section 80CCD. The downside is that annuity income is subject to taxation.
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How to get Rs 50,000 pension per month?
Let's break down the financial outlay required to fund a monthly pension of Rs 50,000. When starting to invest at age 24, the NPS calculator suggests putting away Rs 6,000 per month. That means, you must save Rs 200 rupees per day. He plans to continue contributing to the plan until he is 60 years old. That's a commitment of 36 years' worth of savings to the plan.
Purchase of annuities is required
Through these means, a person plans to have invested Rs 25,92,000 by the time he turns 60. The entire corpus value would be Rs 2,54,50,906 if a 10% return was assumed. Rs 1,01,80,362 is the amount that would be paid out if the NPS invested in an annuity at a 40% rate of the income earned at maturity. At a 10% rate of return, his annual income will be Rs 1,522,705,44 in cash. After reaching retirement age, a person would get a monthly pension of Rs 50,902.
