National Pension Scheme: One of the best retirement schemes for salaried employees is the National Pension Scheme or NPS which helps you build a corpus for old age and claim tax benefits at the same time. The scheme is open to employees from the public, private and even the unorganized sectors with the exception of those from the armed forces. It encourages people to invest in a pension account at regular intervals during the course of their employment. After retirement, the subscribers can take out a certain percentage of the corpus.

What are types of NPS?

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“In NPS, the Subscriber’s fund are invested majorly in 3 asset classes –ECG (i.e. Equity, Corporate Debt and Government Securities). A Subscriber can choose to invest entire pension wealth in C or G asset class,” Amit Sinha - Executive Vice President, NSDL e-Governance explained. 

He said that under equity, investors can allocate maximum 75% of their money to asset class 'E' or up to 5% in Alternative Investment Funds. This option exercised is known as Active Choice.

“Alternatively, a subscriber can select Auto choice, where the allocation is based upon the age of the subscriber. In this option, the investments will be made in a life-cycle fund. Here, the proportion of funds invested across three asset classes will be determined by a pre-defined portfolio (which would change as per age of Subscriber). Further, depending upon the risk appetite of Subscriber, there are three different options available within ‘Auto Choice’ –Aggressive, Moderate and Conservative,” he added. 

The investors can opt for changing scheme preference twice in a financial year. They can get more information about the scheme on YouTube channel “NSDL-NPS Ki Pathshala”. 

What are the tax benefits of NPS?

The National Pension Scheme comes with tax benefits under Section 80C and Section 80CCD of the income tax. You can claim any additional self-contribution (up to Rs 50,000) under section 80CCD(1B) as NPS tax benefit.

“Individuals who are employed and are contributing to NPS would enjoy tax benefits on their own contributions as well as their employer’s contribution as applicable,” Sinha said.