Planning Your Retirement?
The National Pension System or NPS is the best to choose. Most retirement plans you choose will have to evolve with time and are a little bit of a waste of money. A financial cushion is not so easy to build, that’s why I have brought you the pre-planned investment scheme. In this article, you will understand all about the NPS retirement scheme and its calculation of how you can earn a ₹1 lakh monthly pension.
Well, starting with the basics NPS or National Pension System is a risk-free investment scheme for your retirement. After opening an NPS account a person needs to deposit the minimum required amount on the monthly basis to generate a regular source of income after his or her retirement. This option has zero risks as this is a Government-backed saving scheme, initially introduced for only Government employees. But eventually, in 2009 it was made eligible for every section.
What Is NPS?
Going as per the officials, NPS is a pension or investment scheme introduced by the Government of India for the secure financial needs of old age citizens. By perfectly calculated long term revenue-generating schemes, citizens can plan their retirement with no hassle at all.
Pension Fund Regulatory and Development Authority (PFRDA) is the regulator of this scheme and the registered lessor of this scheme is “The National Pension System Trust (NPST), established by the PFRDA.”
Features And Benefits Citizens Get Under The Scheme
NPS is categorised differently for both sectors: Government employees and other Individuals. All the central employees are bound to invest mandatorily in this scheme who have joined on or past January 1, 2004. But after the revision of rules in 2009, any individual can volunteer to join NPS but should be aged between 18-60 years.
Under this savings scheme cum investment plan the investors can select or change the factors affecting their revenue directly or indirectly which includes, “investment pattern and fund manager.”
NPS Account Types
There are two sorts of NPS accounts: Tier 1 and Tier 2
Tier 1– under this category when an account is opened, then the purpose is mainly to generate retirement savings with the minimum deposit amount of ₹500 at the time of opening. This plan also avails the benefits of tax deduction Under Section 80CCD (1B) of the Income Tax Act, 1961. This means, a person can withdraw 60 per cent of his contributions made towards the account in the working years at retirement time, which is tax-free. The remaining 40 per cent is converted into annually paying financial products.
Tier 2– under this category the account is opened with the minimum deposit of ₹1,000, where a person is eligible to withdraw his entire contributions, also at any time, but without any tax benefits.
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NPS Rough Calculation To Understand ₹1 Lakh Monthly Pension Idea
Let’s take an example of a 25-year-old individual, if he plans to invest in this scheme at his age with ₹5,000 monthly. The final contributed amount will be ₹21 Lakh at the time of retirement. Then according to the return rate of 10 per cent annually, the total amount including the invested amount will be ₹1.87 Cr. Now if the subscriber converts his 65 per cent total amount into an annual product then the valued amount will be ₹1.22 Cr. Then if we assume the annuity rate to be 10 per cent, then the monthly pension amount will be ₹1 Lakh.
