Earlier, the introduction of Section 80 CCD (1B) gave it an edge over other tax-saving investments and later on, making the entire 60 per cent of the corpus on maturity tax-free has made several investors consider NPS as a long-term investment for their retirement needs. The NPS withdrawal on maturity enjoys 100 per cent tax-free status. One of the major advantages of NPS are that it is a low-cost investment option and is a dedicated scheme for post-retirement needs.
Let’s explore some features, how NPS works and see its suitability and the watch-outs:
Anyone between 18 and 60 years can open an NPS account and start saving till retirement. However, Pension Fund Regulatory and Development Authority (PFRDA) had increased the maximum age of joining under NPS - Private Sector i.e. under the All Citizen and Corporate Model from the existing 60 years to 65 years of age. It means anyone between 60 and 65 can now join NPS and continue till age 70.
For those joining after 60, the investments options and the pension fund manager etc remains the same. The normal exit will be after 3 years when the subscriber is allowed to withdraw a maximum of 60 per cent of the corpus while the balance 40 per cent will have to be compulsorily annuatized. It means the subscriber has to purchase pension or annuity from any of the life insurance companies using 40 per cent of the NPS corpus. In case, one decides to exit before completion of three years, only 20 per cent can be withdrawn while pension will be paid on the balance 80 per cent of the corpus.
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