When it comes to Indian investor as an investment option they still
prefer conventional instruments on high yielding investments assets. This is a
standalone reason why millions of investors in India opt fixed deposits over
investment securities fetching high returns on the verge of high risk.
Recent 2015 Budget fillip in which Finance Minister Arun
Jaitley highlighted a merit on National Pension Scheme (NPS) seems to bridge
the break. However, NPS is in investment market for many years but this time it
has taken different avatar. Let’s check its predecessor look and what it is
going to be in coming time.
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NPS Before
NPS came into picture in 2004 under the administration of Pension
Fund Regulatory and Development Authority (PFRDA). The idea to bring NPS was to
offer returns and securities to senior citizens if the sources of their regular
income get dried.
One can invest up to Rs 1.5 lakh under Section 80C of the
Income Tax Act. Both self employed and salaried people could invest in the
scheme and claim tax deductions. It was Rs 1.5 lakh which can be deducted at a
maximum under Section 80C.
NPS after the Budget
Subsequent to the finance minister proposal, there would
be an extra tax deduction in NPS now for a maximum investment of Rs, 50,000.
Therefore, on an exemption above Rs. 1.5 lakh NPS investors can have an extra deduction
of Rs 50,000 under Section 80C. This means there would be a maximum of Rs 2
lakh amount for the tax deduction slab resulting in one of best investment
option for taxpayers. Apart from extra tax deduction all other features will
remain constant.
Five Points to Note before you invest:
1.
Savings
on tax: The additional deduction of Rs 50,000 will be applied to the people
in the top tax bracket i.e 30% making an extra Rs 16,000 of taxes. People who
are in the tax bracket of 20% can save
upto Rs 10,000 although 10% bracketers can save up to Rs 5000
2. Tax
on withdrawal: There is no extension on the tax break up on NPS withdrawal,
making it a taxable investment on the withdrawl which is not the case in PPF
and EPF schemes.
3.
Withdrawal
Options: It is allowed to withdraw from NPS after attaining an age of 60
years. However, minimum 40% of the accumulated pension amount is mandatory to
purchase life annuity for the pension due every month.
4.
Minimum
Deposit: Rs 6,000 must be deposited by the investor every year although a
minimum amount stands at Rs 500 at one time.
5.
Return:
The returns from the scheme are totally market linked. Account holder has the option
to invest in government bonds, stocks or any other marketable securities as per
his choice but this allocation of equity should not go beyond 50%.
Toll Free Number for
any NPS related query
1800110708
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