Skip to main content

National Pension System

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

 

 

 

Retirement planning is a very important part of goal planning. The National Pension Scheme (NPS) also called as New Pension Scheme (NPS) is a pension scheme by the Government, based on a defined contribution by the investor. You can open an account to accumulate a pension corpus by contributing monthly. Your contributions grow based on the investment avenue you choose.



Features of NPS 
1. Any citizen above 18 years can invest in NPS with a minimum investment size of Rs 6000 per year. There is no maximum investment cap.
2. You can open an NPS account by visiting any registered point of purchase (POP) and submitting KYC documents. There are 22 registered POPs across the country, including some banks and financial institutions.
3. Investors can choose from six different fund managers for investment across three styles - low risk, medium risk and high risk. If you choose the high risk investment option, upto 50% of the corpus is invested in equity linked instruments or index funds which mirror the Sensex. You can switch funds without any cost or tax implication.
4. Annual charges in NPS are very low at 0.00009% for fund management.


Structure of the scheme
NPS is available in two forms:
Tier-1 account- This account does not allow premature withdrawal of your retirement savings. Money will be available on maturity only, ie: when you turn 60 years. Typically, if an employer is offering NPS, he will make a contribution in Tier-1 account, equal to your contribution.

Tier-2 account- This account is a voluntary savings facility where you can withdraw your savings whenever you wish. The Government and employers make no contribution to this account. However, to open this account you will need an active Tier I account.

Withdrawal of funds from NPS
Premature withdrawal before you are 60 years: You are required to invest a minimum of 80% of accumulated wealth to purchase a life annuity from a registered life insurer. You are allowed to withdraw the remaining 20% as a lumpsum.

Withdrawal on attaining 60 years: You will have to invest a minimum of 40% of your accumulated amount to purchase a life annuity from a registered life insurer. The remaining amount can be withdrawn as a lumpsum or in a phased manner till you reach the age of 70.

Death of the investor: In case of death of the investor, the nominee will receive 100% of the accumulated wealth in the account.

Taxation
At present, contributions made to Tier 1 account follow "Exempted-Exempted-Taxed". The contribution amount, the appreciation accrued on the contribution and the amount used by the subscriber to buy the annuity are not taxable. However, the amount withdrawn by the investor is taxable. Going forward, as per the Direct Tax Code (DTC), the tax treatment is proposed to follow "Exempted-Exempted-Exempted", similar to PPF - in addition to the existing benefit, the amount withdrawn by the investor after the age of 60 will be exempted from tax. Since the way forward on DTC itself is not very clear at the moment, this may not get sorted out easily, sometime soon.

Benefits of the scheme
1. Better Returns compared to PF: The biggest advantage of NPS compared to other retirement options is the high rate of return which the investor can receive. As NPS provides the option to the investors to decide the manner in which their money is to be invested (ie: in equity market instruments/fixed income instruments/government securities), returns are higher than traditional retirement options like PF. You also have the option of shifting from one fund manager to another, without incurring additional costs helping you invest in the best fund. Since the scheme gives market determined rates, in the long run, this is likely to be a far more viable option. 

2. Safe bet compared to mutual funds: Though investment options like mutual funds give a higher return than NPS, the latter is a safe retirement planning option as there is a cap on the amount which can be invested in equity, ie:50% of funds. Further, the scheme has Government backing and is regulated, which makes it a safe avenue.

3. NPS is, by far, the cheapest pension product with very low annual charges.

4. Contributing to NPS gives you a tax benefit under Sec 80C. You can also claim additional deduction under Sec 80CCD(2) if your employer contributes upto 10% of your basic salary in the scheme.

Pitfalls of the scheme

The most important drawback of the NPS is the inflexibility in withdrawal of funds from Tier-1 account. Though withdrawal is permitted from Tier 2 account, the investor needs to open a Tier-1 account first. This has acted as a deterrent to non-government employees. Further, unlike PF, an investor cannot avail a loan against his NPS holdings.

Though the NPS is an attractive investment option by the Government, it is still not very well-known among the investor community. This is an ideal scheme for conservative and balanced investors who can enjoy better returns compared to other investment options at a low cost and with Government backing.

 

 

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

    1. Largecap Funds             Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds         Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds          Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds   Invest Online

      1. DSP BlackRock MicroCap Fund

2.       Franklin India Smaller Companies

E. Sector Funds          Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds      Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds        Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds         Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

Tata Mutual Fund

Being a part of the Tata group, the fund has the backing of a very trusted brand name with strong retail connect. While the current CEO has done an excellent job in leveraging the Tata brand name to AMC's advantage, it is ironic that this was just not capitalised on at the start. Incorporated in 1995, Tata Mutual Fund remained an 'also-ran' fund house for around eight years. Till March 2003, it had a little over Rs 1,000 crore in assets and 19 AMCs were ahead of it. But soon after that the equation changed. It was the fastest growing fund house in 2004 and 2005. During these two years, it aggressively launched six equity funds, two debt funds and one MIP. The fund house as of now stands at No. 8 in terms of asset size. This fund house has a lot to offer by way of choice. And, it also has a number of well performing schemes. Tata Pure Equity, Tata Equity PE and Tata Infrastructure are all good funds. It also has quite a few good debt funds. The funds of Tata AMC are known to...
Read more

UTI Mutual Fund

Even though only a few of UTI’s funds are great performers, this public sector fund house has many advantages that its rivals do not. It has a huge base of retail equity investors and a vast distribution network. As a business, it looks stronger than ever, especially in the aftermath of credit crunch. UTI is, by a large margin, the most profitable fund company in the country. This is not surprising, since managing equity funds is more profitable than debt. Its conservative approach and stable parentage is likely to make it look more attractive to investors in times to come. UTI’s big problem is the dragging performance that many of its equity funds suffer from. In recent times, the management has made a concerted effort to improve performance. However, these moves have coincided with a disastrous phase in the stock markets and that has made it impossible to judge whether the overhaul will eventually be a success. UTI’s top performers are a few index funds, some hybrid funds and its inf...
Read more

Salary planning Article

1. The salary (basic + DA) should be low. The rest should come by way of such allowances on which the employer pays FBT and you don't pay any tax thereon. 2. Interest paid on housing loan is deductible u/s 24 up to Rs 1.5 lakh (Rs 150,000) on self-occupied property and without any limit on a commercial or rented house. 3. The repayment of housing loan from specified sources is also deductible irrespective of whether the house is self-occupied or given on rent within the overall ceiling of Rs 1 lakh of Sec. 80C. 4. Where the accommodation provided to the employee is taken on lease by the employer, the perk value is the actual amount of lease rental or 20 per cent of the salary, whichever is lower. Understandably, if the house belongs to a family member who is at a low or nil tax zone the family benefits. Yes, the maximum benefit accrues when the rent is over 20 per cent of the salary. 5. A chauffeur driven motor car provided by the employer has no perk value. True, the company would...
Read more

8 Investing Strategy

The stock market ‘meltdown’ witnessed since the start of 2005 (notwithstanding the recent marginal recovery) has once again brought to the forefront an inherent weakness existent in our markets. This is the fact that FIIs, indisputably and almost entirely, dominate the Indian stock market sentiments and consequently the market movements. In this article, we make an attempt to list down a few points that would aid an investor in mitigating the risks and curtailing the losses during times of volatility as large investors (read FIIs) enter and exit stocks. Read on Manage greed/fear: This is an important point, which every investor must keep in mind owing to its great influencing ability in equity investment decisions. This point simply means that in a bull run - control the greed factor, which could entice you, the investor, to compromise with your investment principles. By this we mean that while an investor could get lured into investing in penny and small-cap stocks owing to their eye-...
Read more

Debt Funds - Check The Expiry Date

This time we give you an insight into something that most debt fund investors would be unaware of, the Average Portfolio Maturity. As we all know, debt funds invest in bonds and securities. These instruments mature over a certain period of time, which is called maturity. The maturity is the length of time till the principal amount is returned to the security-holder or bond-holder. A debt fund invests in a number of such instruments and each of these instruments would be having different maturity times. Hence, the fund calculates a weighted average maturity, which would give a fair idea of the fund's maturity period. For example, if a fund owns three bonds of 2-year (Rs 30,000), 3-year (Rs 10,000) and 5-year (Rs 20,000) maturities, its weighted average maturity would be 3.17 years. What is the big deal about average maturity then, you may ask. Well, knowing a fund's average maturity is important because it tells you how sensitive a fund is to the change in interest rates. It is ...
Read more
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