NPS : Ideal for Retirement planning

Retirement planning is an uphill task , especially, when they are unsure of whether to rely more on equities or debt to fund their 60 plus age financial requirements. Though it can be a little overwhelming for you to make all the decisions about savings for the post-retirement life but planning  well in advance helps you live those years calmly.

The NPS scheme is now available on a voluntary basis for all citizens of the country. It commits regular pension after retirement. NPS also offers tax benefits under Section 80C & Section 80 CCD.

1. Taxation : In the case of NPS exemption is of Rs. 2 Lakhs under Section 80CCD (1) and Section 80CCD 1(B). Purchase of annuity from NPS corpus comes under tax exemption. In the 30% tax bucket , additional deduction of Rs.50000 under Section 80 CCD(1B) results in saving of Rs.15600 yearly. They can bring down the tax liability further if the employer puts up to 10% of their basic salary in NPS under Sec 80 CCD(2).

2.Asset Allocation : It offers you choice of two investing choices : Active and Auto. Under Active , you can pick your own asset mix deciding split of equity and debt . In auto choice , based on your age if finalised the asset mix. Maximum equity allocation is 75% in NPS . NPS lets you pick the bet fund manager for each asset class and allows them to switch fund managers once a year.

3. Withdrawal : Contributions are locked till you are 60. On retirement , 60% in NPS can be withdrawn in lump sum and remaining 40% directed towards annuity. Partial withdrawal of 25% allowed  with specific reasons only after completion of three years.

4.Costs :  Fund management expenses are 0.09% vs mutual fund expense raio of 2% which is a win win for NPS subscribers.