Nps: Fill & Download for Free

What is NPS?It is a National Pension Scheme by the Indian government with an intention to help Indian citizens in creating a retirement corpus at the age of 60 years.This scheme is available for everyone including employees from public and private sector as well as business owners.Eligibility age is between 18 to 65 years.Why NPS?Before we discuss the type of NPS, let’s try to understand why you should invest in NPS?Tax Saving: While most of the tax-saving options fall under 80C up to Rs 1.5 lakh, NPS offers additional tax saving up to Rs 50,000 under 80CCD(1B). This feature makes NPS stand out from the rest of the investment option. For example, a person falling under a 30% tax bracket can directly save Rs 15,600 (including cess). That’s straight away saving!Discipline Investment: There is a restriction on withdrawal in NPS up to the age of 60 years under tier 1 (Tier 1 is explained below under type of NPS). This means that you can’t take out your money until the age of 60 years.Isn’t it bad? No!It is really good. Why? Because most of the investors lack discipline while investing. They end up breaking their investment in between which results in reduced retirement corpus. The entire motive behind NPS is to create a retirement fund. Hence, it makes sense to have some restriction on withdrawal. Moreover, this is government-sponsored hence there is a level of trust.Exempt Exempt Exempt (EEE) Status: FInally, one very important feature of NPS is EEE status. The investment in NPS has tax exemption. The annual returns are tax exempted. Finally, the withdrawal amount is tax exempted. The only catch is that you can only withdraw 60% of the total retirement corpus. The rest of the money should be invested in buying annuity which would provide a retirement income. The annuity is tax exempted at the time of investment. However, the monthly retirement amount from the annuity is taxed as per the income slab.What type of NPS?NPS is broadly classified into 2 categories: Tier I and Tier IITier I:Investment is locked till the age of 60 years and hence this category is for retirement.Partial withdrawal is allowed only after 3 years. Maximum 25% can with withdrawn.This category is tax exempted. Minimum initial investment is Rs 500 and annual minimum investment is Rs 1,000 and there is no upper limit.Tier II:There is no lock-in on investment in this category. Hence, you don’t have to wait until the age of 60 years. The amount can be taken out at any point in time.However, the tax exemption is up to 1.5 lakh under 80C and does not provide additional tax saving of Rs 50,000 under 80CCD which is provided by Tier I.Even the returns from the tier II category are taxed as per the slab.Where do they invest the money?Within each tier, there are 4 categories for investment:Class E: Equity (This category is directly linked to market performance as the investment is in passive mutual funds like an index fund and ETF. In the long run, this category has greater potential for higher returns)Class C: Corporate Debt (This category invest in buying corporate bonds at a specific interest rate. Hence, this is less risky as compared to equity but the returns are comparatively lower)Class G: Government Security (This category buys government bonds at a specific interest rate. Hence, this is less risky as compared to equity but the returns are comparatively lower)Class A: Alternative investment (This category invest in alternative options like property and infrastructure projects)An investor has 2 options to choose the category: Either by automatic mode or by active mode.Auto Mode: An investor has an option to choose among 3 life cycles (LC): LC 25, LC 50 or LC 75. Here, LC 25 means 25% allocation in equity, LC 50 means 50% allocation in equity and LC 75 means 75% allocation in equity. The catch is that in auto mode, after the age of 50 years, there is a reduction of 2.5% from equity. It means that if you have opted for LC 75 then after 50 years of age, 2.5% allocation from equity would reduce every year. Hence, at the age of 60 years, the equity allocation would reduce from 75% to 50%. Class A is not available under auto mode.Active Mode: Investor can choose equity exposure but maximum allowed equity exposure is 75%. Additionally, a 5% allocation can be made into class A. There is no auto deduction from equity after the age of 50 years.What about the returns?Below is the screenshot from moneycontrol last updated on 2nd Jan 2020.How it is different from a mutual fund?NPS is a type of hybrid mutual fund with a mix of equity and debt allocation.While most of you would be thinking that if it is really a hybrid mutual fund, we can also invest ourselves in equity funds for the long term and do not need NPS. But the best apart from NPS is tax deduction up to Rs 50,000 under 80CCD which saves more than Rs 15,000 if you fall under 30% tax slab.Calculation to check if NPS is really good as compared to mutual funds?Let’s try to compare the returns from NPS vs Mutual Fund with the following assumptions:Investment Amount: Rs 50,000 for NPS. Rs 35,000 for 30% tax slab and Rs 40,000 for 20% tax slab.Investment Duration: 30 YearsReturn from the mutual fund: 12% CAGR (Returns are considered on the conservative side)Return from NPS: 12% from equity and 8% from Bonds. Assuming 75% allocation in equity and 25% in bonds, the weighted average of the return would be 11%Tax Slab: 30%Tax saving from the mutual fund: NilTax saving from NPS every year: Rs 15,000 (30% of 50,000) *we have not included cess for easy calculation*Now, Rs 50,000 per year in NPS at 11% for the next 30 years would give a return of Rs 1.1 Crore. However, you can withdraw only 60% at a time (tax-free). Rest 40% needs to be put into annuity plans for monthly income.If the same amount is invested in equity mutual funds after-tax deduction, a person falling under 30% tax slab would have a corpus of Rs 94.6 lakh. On top of this, there is a 10% tax on the profits.If the same amount is invested in equity mutual funds after-tax deduction, a person falling under 20% tax slab would have a corpus of Rs 1.08 crore. On top of this, there is a 10% tax on the profits.Hence, tax benefit results in NPS providing a better return as compared to equity mutual fund and makes sense to get an additional tax benefit of Rs 50,000 with NPS.Please ensure that you first avail the tax benefit of Rs 1.5 lakh under 80C. The best option to avail this tax benefit is ELSS. You can read more about tax saving: Sahil Bhadviya's answer to How do I save tax in India?Note: I have collaborated with ETMoney on creating awareness about personal finance where I would be sharing content on their space: Money ManagementYou can follow this space to gain a good knowledge of personal finance.

Impress everyone, from colleagues, to customers, to friends - and not just your boss."Hey, you know that new lady in ops, what's her name, I think it's Lucy, she just gets things done fast."It's Lucy that'll get a mention to her manager, it's Lucy that this guy will try to take with him when he moves to a new company.But it works like the Net Promoter Score (NPS) - the survey system which asks customers to rate their experience. In the NPS only a 9 or 10 out of 10 is considered a promoter, an 8 is passive, and a 6 or below is a detractor - you really need to stand out - 8/10 isn't good enough.If you want to know if a company is going to succeed just look at its NPS - it's one of the strongest indicators of success. If we measured our own personal NPS, the same would apply.My own biggest pay-rise during my time as an employee happened when a colleague moved to a rival bank. A few months later that bank gave me that offer.My boss had nothing to do with the pay-rise of my career - my personal NPS did.People talk, word gets out.

Disadvantages of NPS schemeLocking of money till you turn age 60.The primary purpose of NPS was to create a pension income. However there is a perception that 60 is too long a time for money to be locked. Recently NPS has made it possible to withdraw the money partially in occurrence of 5 events that are marriage, skill development, child education, critical illness and house purchase.Employer contribution in NPS is not mandatory, only EPF is.Unlike US, UK, Canada most employers in India do not give retirement benefit as a default benefit to their employees. So employees are not aware about NPS and think that pension benefit is a personal choice. I think employers must start thinking about this long term benefit of their employees even if it is not mandatory by government.Equity investment in NPS is riskyNPS is considered as risky because a certain portion of the money saved is put in equity market. The risk can be minimized significantly by opting for an auto-choice and conservative plan - also called LC25. In this plan maximum money in equity market is 25% for an investor of age till 35 and decreases by 1% with the age.Not many beneficiaries of NPS as of todayNPS started in 2004 and will take at least 25 years for anyone to see if the saving results in enough returns for pension or not. Mathematically the average year on year return so far has been 9.6% per year. So with not many people saving in NPS it becomes difficult to adopt this new savings method.