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New Pension Scheme


The National Pension Scheme may be a Social Security initiative by the Central Government. This pension pr8ogramme is hospitable employees from the general public, private and even the unorganised sectors except those from the soldiers. The scheme encourages people to take a position during a pension plan at regular intervals during their employment. After retirement, the subscribers can remove a particular percentage of the corpus. As an NPS account holder, you’ll receive the enduring amount as a monthly pension post your retirement.

Previously, the NPS scheme covered only the Central Government employees. Now, however, the PFRDA has made it hospitable to all Indian citizens voluntarily. NPS scheme holds massive value for anyone who works within the private sector and requires a daily pension after retirement. The scheme is transferable across jobs and locations, with tax benefits under Section 80C and Section 80CCD. 

Who should invest in the NPS?
The NPS may be a good scheme for anyone who wants to plan for his or her retirement early and features a low-risk appetite. A daily pension (income) in your retirement years will little question be a boon, especially for those individuals who retire from private-sector jobs. A scientific investment like this will make a massive difference to your life post-retirement. Salaried people who want to form the foremost of the 80C deductions also can examine this scheme. 

Features and benefits of NPS 

  1. Returns/ Interest
    A section of the NPS goes to equities (this might not offer guaranteed returns). However, it delivers returns that are much above other traditional tax-saving investments, just like the PPF. This scheme has been in result for over a decade; then far, it has delivered 8% to 10% annualised returns. In NPS, you’re also allowed the choice to vary your fund manager if you’re not happy with the fund’s performance.
  1. Risk assessment
    Currently, there’s a cap within the range of 75% to 50% on equity exposure for the National Pension Scheme. for state employees, this cover is 50%. Within the range prescribed, the equity portion will reduce by 2.5% annually from the year the investor turns 50 years old. Although, for an investor of the age 60 years and above, the cap is secured at 50%. It stabilises the risk-return equation within the interest of investors, which suggests the entity is somewhat safe from the equity market volatility. The earning capability of NPS is higher as compared to other fixed-income schemes.
  1. Tax efficiency There is a reduction of up to Rs.1.5 lakh to be maintained for NPS – for your contribution as well as for the employer’s contribution. Following are the sections which are covered under tax efficiency in NPS:
    • 80CCD(1) covers the self-contribution, which may be a part of Section 80C. The utmost deduction one can claim under 80CCD(1) is 10% of the salary, but no quite the said limit. For the self-employed taxpayer, this limit is 20% of the gross income.
    • 80CCD(2) enfold the employer’s NPS contribution, which cannot form a part of section 80C. This benefit isn’t available for self-employed taxpayers. The part eligible for deduction will be rock bottom of the below:
      • Actual NPS contribution by employer
      • 10% of Basic + DA
      • Gross total income
    • You can assert any additional self contribution (up to Rs 50,000) under section 80CCD(1B) as NPS tax benefit . The scheme permits a tax deduction of up to Rs 2 lakh in total.
  1. Withdrawal rules after 60
    Contrary to common belief, you can’t withdraw the whole corpus of the NPS scheme after your retirement. You’re compulsorily required to stay aside a minimum of 40% of the corpus to receive a daily pension from a PFRDA-registered insurance company. The remaining 60% is tax-free now. Read here to understand the newest news on NPS. Read here to know the latest information on NPS. Read here to learn the latest news on NPS.
  1. Early withdrawal and exit rules
    As a pension scheme, you need to continue investing until the age of 60. However, if you’ve been investing for a minimum of three years, you’ll withdraw up to 25% indeed causes. These include children’s wedding or higher studies, building/buying a house or medical treatment of self/family. You’ll make a withdrawal up to 3 times (with a niche of 5 years) within the whole tenure. These restrictions are only forced on tier I accounts and not on tier II accounts.
  1. Equity allocation rules
    The NPS invests in several schemes, and therefore the Scheme E of the NPS invests in equity. You’ll allocate a maximum of fifty of your investment to equities. There are two options to take a position in – auto choice or active choice. The auto choice decides the danger profile of your investments as per your age. For example, the older you’re, the more stable and fewer risky your investments. The active choice allows you to make a decision on the scheme and to separate your assets.
  1. Option to convert the scheme or fund manager
    With NPS, you’ve got the supply to vary the pension scheme or the fund manager if you’re not proud of their performance. This feature is out there for both tiers I and II accounts.

Hence, consider investing in the NPS scheme if the benefits elaborated above match or risk profile and investment goal. If you are open to more equity disclosure, many mutual funds serve investors from diverse backgrounds.

At AJSH, we assist our clients with various income tax compliances, including income tax assessments, TDS returns, ITR filings, tax advisory and other related services by providing them adequate support and guidance from our end. If you have any questions or wish to know more about the NPS scheme, kindly contact us.


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