Tax benefits with NPS: The deadline for this financial year is about 10 days away. You can only get tax deductions on investments made until March 31.
If you haven’t invested yet for tax savings, you can do so before March 31. Moneycontrol is informing you about the National Pension System (NPS).
By investing in NPS, you can manage your expenses after retirement and save on taxes. Experts recommend having NPS in your investment plan.
Even if you’ve already invested up to Rs 1.5 lakh under Section 80C, you can still get an extra deduction of Rs 50,000 by investing in NPS.
This deduction is available under Section 80CCD(1B).
Things to know before investing
It’s important to know some key points about NPS. Firstly, like other tax-saving investments, NPS also has a lock-in period.
You can only use the money in NPS when you turn 60 years old. However, you can withdraw some money after three years of opening the account.
Once you turn 60, you can withdraw 60% of the NPS money as a lump sum, without paying any tax. The remaining 40% must be used to buy annuity, which provides regular pension income.
You can open an NPS account online. Individuals between 18 to 70 years old can invest in NPS.
To open an online account, visit the NPS Trust website and choose one of the three portals of the Central Record-Keeping Agency (CRA). You can also open an account through DigiLocker.
Steps to open an online account
Gather necessary documents: Before visiting the Protean portal, make sure you have your PAN,
Aadhaar number, a canceled check copy, mobile number, email ID, a bank account with net banking, and scanned photograph ready.
Generate Acknowledgment Number: After registering on the Protean portal, click on ‘Register Now’ under the Individual Subscribers tab.
You must provide your PAN, Aadhaar-linked mobile number, email ID, and date of birth. Confirm your details with the OTP received on your mobile.
Then, upload a soft copy of your signature. Double-check all details before generating the acknowledgment number, which will be sent to you via SMS or email.
Select your pension fund manager: Choose from 11 pension fund managers to manage your retirement investments.
You can invest in NPS funds according to your preference, including equity, government securities, corporate debt, and alternative assets.
You can select up to three fund managers for different asset classes, with a maximum investment of 75% in equity.
Nominate correctly: Appoint a nominee and decide on their share if there’s more than one nominee. In case of your demise, they will receive the money accordingly.
Upload scanned copies of PAN, canceled check, and signature before proceeding with payment.
Make your first contribution and generate ePRAN: Initially, contribute at least Rs 500 to your Tier 1 account.
If you want to receive your ePRAN card and welcome kit digitally, pay a fee of Rs 18. Ordering through physical mode may require additional charges.
