There is only some time left for the end of the financial year 2022-23. In such a situation, taxpayers have started investing in the option of tax saving. If you are also looking for an option for tax saving, then you can choose the National Pension System (NPS). NPS is the most preferred option for creating a retirement fund. Along with this, income tax exemption is also available under section 80C of income tax. NPS also comes under 80C and by investing in it, you can plan for your retirement by taking advantage of tax benefits.
Two types of accounts are opened
Any person between the age of 18 to 65 years can start investing by opening an NPS account. You can also open an account online or you can apply for it by going to Point of Presence (POP). Two types of accounts are opened under NPS – Tier-1 and Tier-2.
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Tier-1 account is mainly for those people, whose PF is not deposited and they want financial security after retirement. An account can be opened by depositing a minimum of Rs 500 in this. After retirement, you can withdraw up to 60% of the amount at one go. Annuities are bought from the remaining 40 percent amount.
long time investment plan
Tier-2 is called investment account. In this, the deposited amount is invested in government bonds, equity and corporate bonds. This scheme is directly related to the government. NPS is considered a long time investment. In this scheme, you deposit money during the job, which you get in the form of pension after retirement.
The investor gets the money deposited in NPS in two ways. The first is that you can withdraw a limited part of the deposited amount in one go, while the other part remains deposited for pension. Annuity is bought from the deposited amount. The more amount you leave for annuity, the more pension you will get after retirement.
tax benefit
The NPS account holder gets an income tax exemption of up to Rs 1.5 lakh under section 80C and an additional Rs 50,000 under section 80CCD. But the income from annuity is taxable. In this way, by investing in this scheme, you can easily save tax along with retirement planning. You can start investing in this scheme any day during the financial year. Also, if you wish, you can also change the investment amount every year.