7 Reasons Why You Should Consider Investing In NPS

There are many benefits of contributing to the National Pension System (NPS), not just during work life, in the form of tax relief and low cost, but also after retirement. Learn more.

Kurian Jose
October 2, 2023
Reasons To Consider Before Investing In NPS

Reasons To Consider Before Investing In NPS

You may be financially independent today, but what happens when you retire? You may have plans for your children’s education or the next family vacation, but have you planned for your retirement? Investment into the schemes operated under The National Pension System (NPS) is vital to ensure your financial independence doesn’t go away.


Here are seven reasons why you should consider investing in the NPS scheme.

  1. Retirement Planning: The primary purpose of NPS is to help subscribers accumulate a sufficient retirement corpus over the long term, thereby ensuring financial security and stability during their retirement years.
  2. Tax Benefits: NPS provides attractive tax benefits to subscribers.
    1. Deduction up to Rs 1.5 lakh under Section 80 CCD (1) of the Income Tax Act.
    2. Further, a deduction of up to Rs. 50,000 under Section 80 CCD (1B) exclusively for NPS investments.
    3. Additionally, a deduction of up to Rs. 7.5 lakh under Section 80 CCD (2) in case of deduction by employer (10 per cent of basic) for corporate employees under NPS.
    4. While subscribers can claim tax deductions on NPS contributions as detailed in the points mentioned above, the withdrawal (up to 60 per cent) is also tax-exempt, making NPS an Exempt-Exempt-Exempt (EEE) category product.
    5. Suitable under the old regime as well as the new regime of taxation for corporate employees. Only NPS investment through salary deduction (80 CCD (2) is available under the new regime.
  3. Flexibility and Control: NPS offers flexibility regarding investment options (active or auto choice), asset classes and selection of fund managers. Subscribers can allocate their contributions across different asset classes, such as government securities, corporate bonds, equities and alternative investment funds, based on their risk appetite and investment goals. You also have the freedom to switch between investment options (four times) and fund managers once in a financial year as per your preferences.
  4. Low-Cost Structure: NPS is known for its low-cost structure. The scheme’s fund management charges are among the lowest in the industry, ensuring that a significant portion of your contributions is invested.
  5. Well Regulated: NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
  6. Long-Term Wealth Creation: Investing in NPS allows you to benefit from the power of compounding over the long term. As contributions grow over time and generate returns, the compounding effect can significantly enhance your investment value and help create substantial wealth for retirement.
  7. Portability and Withdrawal Flexibility: The NPS offers portability, which means you can continue the scheme even if you change jobs or locations. Additionally, the scheme allows partial withdrawals for specific purposes like education, medical treatment, and home purchase, subject to certain conditions.

Secure your retirement future with the National Pension System (NPS) today and embark on a worry-free journey towards financial independence.

The author is the CEO of Tata Pension Management Private Ltd

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