🔴Is (NPS) National Pension System BEST retirement plan? Full details in Hindi

Summary

In this episode of Labour Law Advisor, Mandeep introduces the National Pension System (NPS) as a retirement planning option offering potentially higher returns than PPF and EPF, with tax-exempt status. NPS is accessible to all, regardless of employment status, and allows for variable returns based on market investments. The video covers account opening, fund management, asset allocation choices, withdrawal rules, and tax benefits, promising further comparisons and calculations in upcoming episodes.

Takeaways

• 📈 NPS is a retirement planning option that can potentially offer higher returns than PPF and EPF.
• 💼 NPS is not restricted to employees of an organization; anyone can start an NPS account independently.
• 📚 The video series aims to address common doubts about NPS and provide a comparison with PPF and EPF.
• 🏦 NPS was initially launched in 2004 for government employees, but since 2009, it is open to all individuals between 18-65 years old.
• 💰 The minimum contribution to open an NPS account is INR 500, with the same amount required annually to avoid dormancy.
• 📊 NPS investments are categorized into four risk levels: Low, Moderate, High, and Very High Risk, with different asset types for each.
• 🤔 Subscribers have the freedom to choose their asset allocation or opt for the Auto Choice option for a preset allocation strategy.
• 🚫 Withdrawals from NPS are generally not allowed until the age of 60, with specific rules for premature withdrawal and exit.
• 💹 Historically, NPS has provided returns between 8-10% over the past decade, sometimes exceeding those of PPF and EPF.
• 🏦 There are seven appointed fund managers for NPS, and subscribers can choose and change their fund manager as desired.
• 💼 The script also mentions the launch of LLA Professional Training Institute, offering practical courses for professional development.

Q & A

What is NPS and why is it considered a good retirement planning option?

NPS stands for National Pension System. It is a retirement planning option because it offers potential for higher returns than PPF and EPF and falls under the Exempt, Exempt, Exempt tax category, allowing for significant tax savings.

Is it necessary to be an employee of an organization to start an NPS account?

No, it is not necessary. Individuals can start an NPS account voluntarily without being an employee of an organization.

What is the minimum amount required to open an NPS account and what is the minimum annual contribution?

To open an NPS account, a minimum of INR 500 is required, and the minimum contribution that needs to be maintained in a year is also INR 500.

What happens if the minimum annual contribution of INR 500 is not maintained for two consecutive years?

If the minimum annual contribution of INR 500 is not maintained for two consecutive years, the account becomes dormant but can be reactivated by paying INR 1000.

How many fund managers has the Government of India appointed for NPS, and what is the significance of this?

There are seven fund managers appointed for NPS. This is significant as it allows subscribers to choose which fund manager will manage their investments and provides the freedom to change fund managers in the future.

What are the four categories of risk associated with NPS investments?

The four categories of risk associated with NPS investments are Low Risk, Moderate Risk, High Risk, and Very High Risk.

What is the maximum percentage of the total fund that can be allocated to Very High Risk assets?

A maximum of 5% of the total fund can be allocated to Very High Risk assets.

What are the two options available for subscribers to decide on the allocation of their funds in NPS?

The two options available for subscribers to decide on the allocation of their funds in NPS are Active Choice and Auto Choice.

What is the lock-in period for NPS, and what are the conditions for withdrawal after reaching the age of 60?

The lock-in period for NPS is until the age of 60. After 60, a maximum of 60% can be withdrawn, and the remaining 40% must be used to buy an annuity for a monthly pension.

What are the tax benefits of contributing to an NPS account under Section 80CCD?

Contributions to an NPS account under Section 80CCD are tax-free, allowing deductions up to 1.5 Lakhs under Sub Section 1 and an additional INR 50,000 under Sub Section 1B, totaling a deduction of up to 2 Lakhs.

What is the difference between Tier 1 and Tier 2 accounts in NPS?

Tier 1 accounts in NPS offer tax benefits, while Tier 2 accounts do not offer tax benefits but provide more flexibility, allowing for investments and withdrawals without any lock-in period or minimum investment requirements.

How can one open an NPS account, and what is the significance of the PRAN?

An NPS account can be opened by visiting a bank or online through the ENPS website. The bank or the website will provide a PRAN, the Permanent Retirement Account Number, which is unique to each subscriber and tracks their contributions.