BQ Big Decisions: You Should Consider Fine Tuning Your National Pension Scheme Investment
Illustration: BloombergQuint

BQ Big Decisions: You Should Consider Fine Tuning Your National Pension Scheme Investment

A motorsport enthusiast will tell you that the key to winning, beyond the skill of the driver, is the fine tuning of the vehicle. Entire teams of specialists and engineers work on a Formula 1 car to eke out that last bit of speed and performance.

You’re probably wondering how this is related in any way to the National Pension Scheme. Many Indians simply invest in the NPS as a way to save tax. Under the old income tax regime, provisions of Section 80 CCD of the Income Tax Act, allow you to save a maximum of Rs15,000 in tax by investing Rs 50,000 in the NPS in a financial year.

That’s over and above the Rs 1.5 lakh that is deductible from taxable income under Section 80 C.

Besides being an attractive tax-saving investment, the NPS is a great tool for accumulating funds for your retirement. What’s more, you can have a fair amount of control over the allocation of funds you put into the NPS. For example, you can choose to have an aggressive approach, where a substantial portion of the funds in your NPS savings are allocated towards equity.

Also, at maturity, you have several options — from withdrawing 60% of the corpus as a lump sum or investing the entire amount into an annuity scheme. You can also choose to defer the maturity of the scheme to beyond the year that you turn 60.

On this BQ Big Decisions podcast, BloombergQuint takes a deep dive into the NPS with Arvind Rao, certified financial planner and founder of Arvind Rao & Associates. Rao explains all the options available and the advantages associated with each of them.

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