The National Pension Scheme (NPS) is a retirement savings scheme that was introduced by the Government of India in 2004. The scheme allows subscribers to make contributions towards their retirement corpus, which can then be used to purchase an annuity to provide a regular income during retirement.
The NPS offers several benefits, including tax breaks and the ability to withdraw a portion of the corpus before retirement. However, there are also some risks associated with the scheme, such as the possibility of poor returns if market conditions are unfavorable.
If you’re thinking about subscribing to the NPS, it’s important to do your research and compare different plans before making a decision. Once you’ve chosen a plan, there are some things you can do to maximize its benefits, such as taking advantage of tax breaks and making regular contributions.
What is the National Pension Scheme Call Option?
The National Pension Scheme (NPS) offers subscribers the option to make an additional contribution of up to Rs 50,000 per annum over and above the regular contribution of Rs 1 lakh. This is called the NPS Tier II account.
The NPS Tier II account comes with a number of benefits that make it an attractive investment option. For instance, it offers flexibility in terms of investment choices and Call Option. Subscribers can choose from a variety of asset classes such as equity, debt, government securities, and corporate bonds. They can also switch between asset classes as per their risk appetite and market conditions.
Another benefit of the NPS Tier II account is that it offers tax benefits under Section 80C of the Income Tax Act. The interest earned and maturity proceeds are also exempt from tax.
Subscribers can withdraw up to 25% of their accumulated corpus at retirement age without paying any taxes. Withdrawals beyond this limit are subject to income tax at the applicable slab rate.
Thus, the NPS Tier II account provides subscribers with an opportunity to grow their wealth while availing of various tax benefits.
