Low charges, high returns, income tax benefits — 5 reasons to choose NPS for retirement planning
economictimes.indiatimes.comNPS) was opened to the general public 15 years ago, it managed to get less than 5,000 voluntary investors. The investment rules were not very clear, the structure was quite complicated and there was also no clarity on the tax treatment of the income.
But over the years, the NPS has undergone many changes and become more investor friendly. The Pension Fund Regulatory and Development Authority (PFRDA) has made the scheme more flexible and introduced new features. It has also made it easier to open an NPS account. If you have the necessary documents, the account can be opened online within minutes. The Finance Ministry has done its bit by introducing tax benefits on contributions, including tax deductions that are exclusive to the NPS and making 60% of the maturity corpus tax free.
As a result, the NPS is slowly gathering pace. In 2023-24, some 8.73 lakh voluntary investors joined the scheme. That’s an average 2,391 investors joining per day, almost 100 every hour. But the NPS is still not the preferred investment vehicle for retirement. With only 55 lakh voluntary investors, it has tapped only 10% of the total investing population in the country.
There are many reasons for this, including low awareness about the scheme, aversion to locking up money for the long term and the compulsory annuitisation of 40% of the maturity corpus. However, investors who stay away from NPS may be missing out on a great investment opportunity. “The NPS offers everything that one looks for in a retirement savings product. It is a
