NPS Interest Rate 2023 and Extra Tax Benefit

What is NPS (National PensionScheme)?

The NPS (National Pension Scheme) is an retirement savings scheme launched by the IndianGovernment in 2004. The scheme aims to provide retirement benefits to all citizens of India, including self-employed individuals and those working in the unorganized sector, who may not have access to any formal pension scheme.

Under NPS, individuals can contribute regularly towards their retirement savings during their working life, and the accumulated funds can be withdrawn upon retirement. The scheme is managed by the Pension Fund Regulatory and Development Authority (PFRDA), which regulates the contributions and investments made under the scheme.

Indian citizen’s between the ages of 18 and 65 can join NPS. Scheme offers two types of accounts – Tier I and Tier II. Tier I account is a mandatory account for all individuals who wish to join NPS and provides tax benefits under section 80CCD of the Income Tax Act. The contributions made towards Tier I account are locked in till retirement, and individuals can withdraw only a portion of the accumulated funds as per the NPS withdrawal rules.

Tier II account, on the other hand, is an optional account that can be opened only if an individual has an active Tier I account. The contributions made towards Tier II account are not eligible for tax benefits and can be withdrawn at any time without any restrictions.

The NPS allows individuals to choose their own investment options and fund managers, thereby providing flexibility and control over their retirement savings. The scheme offers a range of investment options, including equity, corporate bonds, government securities, and alternative investments. Individuals can choose to allocate their contributions across these options as per their risk profile and investment objectives.

Conclusion, NPS is a useful retirement savings scheme that provides tax benefits, flexibility, and control over investments. It is advisable for individuals to assess their retirement needs and financial goals before investing in NPS.

NPS Tax Benefit 

1. Salaried:

Upto 10% of basic salary + DA, total limit up to 1.5 Lacs under section 80CCE of income tax act 1961.

2. Self Employed:

Upto 20% of gross income, total limit up to 1.5 Lacs under section 80CCE of income tax act 1961.

Extra deductions up to 50000 under section 80CCD 1B  of income tax act 1961.

NPS Interest Rate: 

NPS is  market linked investment where you can choose invest in as follows

• Corporate debt
• Government debt
• Equity
• Alternative assets

NPS Returns:

Corporate Bonds

• 1 year return 12.46% to 14.47%
• 5 years return 9.27% to 10.15%

Government Bonds

• 1 year return 12.95% to 14.26%
• 5 years return 10.29% to 10.88%

Equity 

• 1 year return 15.33% to 18.81%
• 5 years return 12.46% to 14.47%

Alternative Assets

• 1 year return 3.98% to 16.73%

NPS Withdrawal Rules and Withdrawal form

Partial withdrawal or emergency withdrawal before maturity 

Following reasons where you can withdraw your money from your account before maturity

• Childrens Education
• Childrens marriage
• House construction
• House loan repayment
• Medical emergency like organs transplant, cancer, kidney disease, life threatening accidents etc.

Conditions:

1. Account more than 3 year old
2. Only 25% of corpus amount can be withdrawal allowed
3. Ony 3 time above option will be given before retirement
4. From one withdrawal to another withdrawal 5 year gap should be there.

Withdrawal rules on Retirement

1. 60% of corpus amount should be returned, which is tax free
2. 40% of corpus amount for annuity which is taxable.

Withdrawal rules on voluntary Retirement

If corpus amount is below 2.5 lakh

* you can withdraw full amount

If corpus amount is above  2.5 lakh

* 80% for annuity

* 20% withdrawal

Withdrawal rules on maturity 

* 60% withdrawal tax free

* 40% annuity taxable

Withdrawal rules on death 

* If private companies employee Nominee can withdraw  full amount

* If government employee 60% can withdrawal and 40% goes to annuity.

Withdrawal procedures 

Online: Visit NSDL website where you can get all details to withdrawa

Offline: please visit POP center with necessary documents.

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Disclaimer: This article is only for information not any advice to purchase or investment.