Skip to main content

New Pension Scheme ( NPS )

Invest in Mutual Funds Online

Download Mutual Fund Application Forms

 

New Pension Scheme (NPS) is a pension scheme launched by Government of India (in effect from 1st April, 2009) and is a defined contribution based pension scheme. NPS differs from the existing pension scheme in the sense that existing pension fund of Government of India offers assured benefits while NPS has defined contribution structure where an individual can decide where his contributed money will be invested. NPS is intended to resemble a 401k plan offered for US employees but not in totality. NPS will follow EET (Exempt Exempt Taxable) structure similar to its global peer but the withdrawal amount after the age of 60 cannot remain invested nor can be withdrawn fully. Another important difference being premature withdrawal is subject to few life changing situations. Let's explore other aspects of this scheme.

Product Structure

The scheme is available in two forms:
1. Tier-I account - Premature withdrawal not allowed
2. Tier-II account - Premature withdrawal allowed

Features

Until now the pension schemes were available to Government employees and employees of big firms who have provident fund facility. With NPS common man gets an entry to the system. The other important features of the schemes are:

1. Low Cost - Annual Fees of .00009% (90 paisa for Rs 10,000) for fund management
2. You can choose from six different funds for investment
3. Withdrawing from one fund and investing in another will not have any tax implication
4. No upper limit on Investment
5. Minimum limit of investment is 6,000 per year
6. Tax benefit over and above the current limit of 1L under sec 80C
7. All citizens between 18 and 55 years can invest in NPS

Taxation

Under the newly introduced Section 80CCD (2), up to 10% of an employee's basic salary put in the New Pension Scheme is tax deductible. If you fall in the 30% tax bracket, the NPS investment under Section 80CCD (2) will reduce your tax liability by almost 15000. Now onwards, NPS will be more beneficial from the tax angle. From the next financial year, contributions by employers to the NPS accounts of their employees can be deducted as a business expense which was not allowed till now. As such contributions will not be part of the Rs. 1 lakh tax deduction limit under Section 80C, your employer's contribution on your behalf will be a tax free benefit for you.

Fund withdrawal

Premature exits before 60 years
You will have to invest 80% of accumulated wealth to purchase a life annuity from registered life insurer
The remaining 20% is liable for withdrawal as lump sum

Exits after 60 years
You will have to invest at least 40% of pension wealth to purchase an annuity

No exits till 70 years
Beneficiary account will be closed and the accumulated amount will be transferred in lump sum

In case of death of the scheme holder nominee will receive the whole amount as lump sum.

NPS scheme on its own vs. the one offered by the employer

If the employer is offering NPS he will be making an equal contribution in the scheme from his side. The structure will be of Tier-1 type where premature withdrawal will not be allowed. You will be liable for additional tax benefit on the employer's contribution.

Additional to above structure individual can also choose a voluntary tier-II account having premature withdrawal facility. Government and employers will make no contribution into this account. The accumulated wealth in this account can be withdrawn anytime without stating any reason.

Benefits to investors

1. Additional tax saving - Both employers and employees will get tax exemption on their contribution
2. Low cost of fund management - The fund management cost is very low, which will enhance the returns
3. Higher return potential as compared to old plans - As it's a defined contribution plan, investors can choose from the 6 funds available for investment for better returns. Rebalancing of accumulated amount is free of cost so you can always invest in the best fund.

The Drawbacks

1. Tier 1 option doesn't give much flexibility - It's a rigid structure. A little flexibility with respect to premature withdrawal would have made it more lucrative.
2. Annuity rates post maturity is not fixed - There is no floor rate decided so you cannot be sure of the returns until maturity.
3. Fund management costs might increase in future - Depending on the pension liability and costs involved this rate might shift northward.
4. Only six fund managers makes it a risky proposition - If we take into account the working population of India this number seems to be pretty risky. As the number of subscribers increase hopefully government will increase this number.

How does employee and employer benefit?

The scheme will benefit both employees and employers a like when they participate. Employees get tax deduction on their contribution and from next financial year employers will be in a position to show their contribution as business expense generating additional tax benefits for the firm

--------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Some of the Top performing Mutual Funds are

  1. HDFC Top 200 Fund
  2. ICICI Prudential Dynamic Plan
  3. DSP BlackRock Top 100 Fund
  4. Birla Sun Life Front Line Equity Fund
  5. Reliance Equity Opportunities Fund
  6. IDFC Premier Equity Fund
  7. SBI Magnum Contra Fund
  8. Sundaram Select Midcap
  9. UTI Dividend Yield Fund

Popular posts from this blog

Post Office Deposits Interest Rates

Best SIP Funds to Invest Online   SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich For further information on Top SIP Mutual Funds contact  Save Tax Get Rich on 94 8300 8300 OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com

LIC Leave Encashment Plan

LIC Leave Encashment Plan       Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot] Com OR Leave a missed Call on 94 8300 8300 --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual Fund Application Forms fro

Power of Compounding in Investments

Power of Compounding in Investments Invest Rs 1,50,000 and Save Tax up to Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds. Save Tax Get Rich Top 10 Tax Saver Mutual Funds for 2017 - 2018 Best 10 ELSS Mutual Funds to Invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Tata India Tax Savings Fund  3. Birla Sun Life Tax Relief 96 4. ICICI Prudential Long Term Equity Fund 5. Invesco India Tax Plan 6. Franklin India TaxShield  7. Reliance Tax Saver (ELSS) Fund 8. BNP Paribas Long Term Equity Fund 9. Axis Tax Saver Fund 10. Sundaram Diversified Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com OR Call us on 94 8300 8300

MF SIP Top Up Online

Mutual Fund SIP Top Up Online As your monthly income grows, so should your savings. With this facility, you can increase your existing monthly SIP contributions. This can be done on a half-yearly and yearly basis. And you can top up with a minimum of Rs.500 per installment or multiples of Rs.500 as per your convenience.

Kotak Banking Exchange Traded Fund (ETF)

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Kotak Banking Exchange Traded Fund (ETF) Kotak Mahindra Mutual Fund has launched Kotak Banking Exchange Traded Fund ( ETF ). The fund aims to provide returns before expenses that closely correspond to the total returns of stocks belonging to the CNX Bank Index , subject to tracking error. For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund Application Forms --------------------------------------------- Best Performing Mutual Funds Largecap
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now