Budget 2024 NPS: Preparations for big changes in pension scheme, investors can get big benefits

Union Budget 2024: NPSBig changes are expected in the pension scheme. The government can make important announcements regarding the pension scheme in the budget.The government cannot fulfill the demand of old pension but those employees who register for NPS and invest in it can get 50% of their last salary as pension. The government says that this will give the employees the same pension as the old pension.

What is NPS

National Pension System i.e. NPS is also a better option for investors planning for retirement. NPS pension system is run by the central government. NPS offers two types of accounts – Tier I and Tier II. Tier I is essentially a retirement account, while Tier II is a voluntary savings account linked to your PRAN. Tier II offers more flexibility in terms of withdrawal, unlike a Tier I account, you can withdraw from your Tier II account at any time. This scheme is market linked. It is necessary to invest in NPS for at least 20 years. After opening the account, contributions have to be made till the age of 60 or till maturity. NPS investors are allowed partial withdrawal before retirement.

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The highest tax exemption is available on NPS

Due to investing in the market, there is a little market risk in it, however there is a possibility of higher returns. In such a situation, NPS can prove to be a better option for investors who want more retirement funds. NPS offers more tax benefits than other options.

Not only does it provide tax exemption under Section 80C of the Income Tax Act on investment up to Rs 1.5 lakh in a financial year, but it also provides tax benefit under Section 80CCD (1B) on investment up to Rs 50,000 per year above Rs 1.5 lakh. That is, investment in NPS provides tax exemption on investment up to Rs 2 lakh in a year, which is not available in any other investment. This scheme is available for all citizens between the ages of 18 and 70 years.

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How much can be withdrawn from NPS?

You can withdraw 25% of the total deposit amount from the NPS account. For this withdrawal, your NPS account must be at least 3 years old. NPS provides many types of flexibility to its subscribers. Account holders can contribute to the NPS fund anytime according to their need in a financial year. They can also change their investment option by choosing it themselves. Along with this, investors get the facility to handle their account online. On retirement, one can withdraw up to 60% of the amount and buy annuity from the remaining fund. The specialty of NPS is that on retirement neither can one withdraw 100% of the fund nor can buy annuity from 100% of the fund. It is necessary to buy annuity with at least 40% of the amount. In this scheme, it is necessary to buy annuity for monthly pension. That is, this scheme not only gives pension and lump sum fund on retirement, investors in NPS get tax benefits before retirement.