The beginning of a financial year brings with it a multitude of financial liabilities. Income tax planning is an important task that should be done in advance. It helps an investor to maximize the value of his assets. Experts say tax planning and investment planning should be done together, because a penny saved is a penny earned. According to them, people spend a lot on tax-saving choices under Section 80C when developing an investment plan. There are, however, alternative options to consider. The National Pension System (NPS), which is a mixture of debt and equity, is one such investment option.
Vinit Khandare, CEO and Founder of MyFunBazaar, commented on the tax benefits for NPS account holders, saying, “An investment in NPS qualifies for an additional tax deduction of $50,000, an ‘additional investment’ in the investor’s retirement, and has grown in popularity among tax planners and investors. Tax savings increase take home pay, allowing the investor to invest in more tax saving opportunities.
Vinit Khandare went on to say that NPS investors have a variety of fund managers and fund allocation options to choose from. When it comes to choosing a fund manager, he or she can do a quick review of each fund’s past performance to help the client make a decision. If one anticipates a drop in performance after investing, it is simple to switch funds online in the middle.
Here are the top five reasons why you should use NPS in your tax planning:
1-Tax savings of up to 2 lakhs in a single fiscal year: A taxpayer can claim tax exemption on income up to 2 lakhs invested in an NPS account in a single fiscal year.
“Anyone who subscribes to the NPS is eligible for a tax credit of up to Rs. 1.5 lac under Section 80C. ‘at Rs. 50,000 is available in NPS above and above the 80C bracket,’ says Sujit Bangar, the founder of Taxbuddy.com.
2-A good substitute for the EPF: with the NPS, you not only save taxes, but you also enjoy the second half of your life: retirement. Because NPS returns are market-related, it’s a good alternative to EPF. If you’re in your 20s or 30s, NPS can be a great way to save for retirement. The NPS system can provide a greater long-term return than the EPF.
3-Tax Free Maturity: “According to current tax laws, NPS investors can receive 60% of the corpus tax-free at maturity. For the remaining 40%, the investor must purchase an annuity; however, he There is no tax due at the time of purchase. As a result, the withdrawal is completely tax-free,” said Vinit Khandare of MyFundBazaar.
4-Investment Model Flexibility: “The ability to choose or change the investment model and fund management is available. This ensures that you can optimize returns to suit your comfort level with different asset classes. assets (equities, corporate bonds, government securities and alternative assets), fund managers and asset classes (equities, corporate bonds, government securities and alternative assets),” said Sujit Bangar from Taxbuddy.com.
5-Long lock-in period: it can be difficult for a young investor to contemplate or think about retirement, but this attitude can harm the retirement age and the corpus – hence the long lock-in period transforms the NPS into a wise investment for retirement.
First published: Jun 05, 2022, 03:55 IST