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5 reasons for making NPS your main retirement vehicle

Tax efficiency and low costs are key advantages of the NPS

July 05, 2021 / 10:32 AM IST

India’s senior citizen demographic has been a matter of justifiable pride. This is the wealth-building generation that contributed to the GDP before globalization. They “made it” without bank loans freely being available back then. You marvel at their financial best practices – saving, paying taxes and investing in State financial products. For them, the National Pension Scheme (NPS) is a social security of sorts.

NPS’ popularity is being credited to its many advantages of exceptional tax benefits and pocket-friendly investments. A scheme earlier restricted to central government employees is now open to all Indians, including NRIs. Being regulated by the PFRDA (Pension fund regulator under the Finance Ministry), there is transparency in governance. I’d say this voluntary scheme offers cheer to the prospect of retired life in India.

There are five major attractive advantages of NPS, which protect the interest of its subscribers.

Reasonable Tax Efficiency: As an NPS subscriber, you can claim exemption of up to Rs 50,000, u/s 80CCD (1B). Secondly, there’s additional tax-saving as my employer contributes* to my NPS account u/s 80CCD (2). The best part is both these benefits are beyond the Rs 1,50,000 limit of section 80C. This makes NPS a more desired tax planning investment.