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Personal Finance: You can earn big profits by investing in NPS, life will be cut easily after retirement, know full details


new Delhi. Post-retirement worries are there for every employed person. For this, he invests in different options. NPS is considered to be the most effective option in this direction, but here also there are two avenues of risk and safe investment. Depending on your age and risk appetite, with a small investment, you can make a huge capital for the future.

AK Nigam, Director, BPN Fincap, says that the National Pension System (NPS) not only provides a lump sum amount after retirement, but also gives an amount for expenses like salary every month. The amount invested here is invested in the stock market, government securities, corporate debt funds and alternative investment funds (AIFs) like real estate, commodities, hedge derivatives. Build your own NPS portfolio if you have a financial understanding.

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Fund manager can choose himself

You have to fill this option at the time of opening NPS account. Such account holders are called Active Choice, who decide their own amount in various investment options. Not only this, you can also choose the fund manager yourself. Since, you know your risk appetite better, you can get big returns even with less investment by investing money in the right place.

Auto Choice: Fund manager will decide where to invest money

If NPS account holders want to avoid the hassle of creating their own portfolio, then opt for the auto choice option. Fund managers invest the amount of such account holders by making a portfolio according to their age. If the age is young, then most of the amount will be invested in corporate debt funds and the stock market, but with age, a greater share of the portfolio will be in government securities and other safe options. However, the fund manager only has accurate information about your age. He cannot assess your financial strength or risk appetite. Hence, it is difficult to get desired returns in NPS through auto choice.

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Build portfolio on three basis

Aggressive investment: By the age of 35, 75% of the money is invested in equities and corporate bonds.

Moderate investment: 50% of the amount goes to equities and the rest to government securities and AIFs.

Limited investment: 25 percent amount in equity and remaining in safe options like government securities, bank FDs.

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94 lakh interest on 18 lakh investment

If you open an NPS account at the age of 30 and invest Rs 5000 every month till retirement (60 years), then the total amount invested under NPS in 30 years will be Rs 18 lakh. If an average interest of 10 percent is applied on this annually, then the total fund will be Rs 1 crore 11 lakh 98 thousand 471. That is, you got Rs 93 lakh 98 thousand 471 as interest. Apart from this, there will also be a saving of Rs 5.40 lakh in the form of tax. If you add this also in the return, then there will be a profit of about 1 crore.

Tax free investment up to Rs 2 lakh annually

There are also two options for tax free investment in NPS. First, you can invest the entire amount of 1.5 lakh received under section 80C of Income Tax here. Second, under 80CCD(1B) an additional investment of Rs50,000 can be made in NPS, which will be tax free. There is no tax on the return received after 60 years. However, if you close the account midway, then the withdrawal will be taxed as per the income tax slab.

It is necessary to buy an annuity of 40 percent

Tradeswift director Sandeep Jain says that on retirement 60 percent of the amount can be taken in lump sum from NPS fund, but it will be necessary to buy an annuity of at least 40 percent of the amount. Pension is received every month from the interest of this amount. If you want, you can also withdraw the entire amount of the annuity later. On the death of the pensioner, this amount is given to the nominee.

Tags: investment, NPS


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