♣ Under NPS account, two sub-accounts – Tier I & II are provided. Tier I account is mandatory and the subscriber has option to opt for Tier II account opening and operation. The following are the salient features of these sub-accounts:
♣ Tier-I account: This is a non-withdrawable retirement account which can be withdrawn only upon meeting the exit conditions prescribed under NPS.
♣ Tier-II account: This is a voluntary savings facility available as an add-on to any Tier-1 account holder. Subscribers will be free to withdraw their savings from this account whenever they wish.
♣ A subscriber has to contribute a minimum annual contribution of Rs.500/- for his Tier I and Rs.1,000/ for Tier II account in a financial year and if not contributed the account will be frozen.
Tax benefit to employee:
Tax benefit for self-employed:
Provisions for withdrawal of the accumulated pension wealth once I attain 60 years of age?
Retire or does not want to continue in the NPS before age 60?
Risk & Return
|Index Based Stocks||Carry Market Risk||3.79%|
|Bond issued by state govt., PSUs, and private firms||Going by the quality of company risk would be low||8.66%|
|Bond issued by central Govt.||Low Risk||
Equity linked savings schemes (ELSS)
What is ELSS:-
Equity linked savings schemes (ELSS) are mutual fund investments that also provide tax savings. ELSS funds are invested entirely into the equity markets, thereby providing good opportunities for growth. However, ELSS schemes also carry the risks associated with the equity market, and there’s no guarantee of any fixed returns.
Tax benefits of ELSS:
You can get tax benefits of up to Rs. 150,000 per year by investing in the various ELSS schemes. You don’t have to pay tax on any dividends earned through ELSS investments. Also, there’s no tax on withdrawal of ELSS investments. Among all the tax-saving options, ELSS has the potential to generate maximum returns.
Withdrawal of ELSS:
ELSS investments have a lock-in period of 3 years, so you cannot withdraw money until that time. When you compare with other tax-saving instruments, the lock-in period of ELSS is the lowest. After three years, you can continue to stay invested as ELSS doesn’t have an expiry period.
Return on ELSS:-
Returns from ELSS depend on the market’s performance. The return is very by company to company. The return on investment can be more than 12% of good mutual fund company or it can be less than 5% of an average company.
Risk on ELSS:-
Risk is depending upon fluctuation of market.
Public Provident Fund
Interest rates are announced by the central government periodically, usually annually. Interest earned is compounded yearly. (The current rate of interest on a PPF account is fixed at 7.9% p.a.)
15 years; account continuance is allowed beyond maturity for 5 years at every renewal, with or without making additional deposits.
500 to open the account
Annual Deposit amount:
500 – Rs.1.5 lakhs per year (can be revised as per government directive)
A deposit has to be made every year, for 15 years, to keep the account active. Failure to make the minimum annual investment will render the account inactive.
Via cash, cheque,PO, DD, online funds transfer; as a one-time deposit or up to 12 installments.
Partial premature withdrawals can be made every year from year 7; withdrawals are subject to conditions. Complete withdrawal of funds can be made only at maturity.
Interests are tax-free and deposited amounts are tax deductible U/S 80C of the Income Tax Act. Withdrawals are exempt from wealth tax.
Allowed; on opening the account or after.
Funds/accounts cannot be transferred between people but can be easily transferred between bank branches or post offices for free.
Loans can be availed against funds held in the PPF account from year 3 to year 6.
Renewal or extension of the scheme is allowed, for an extra 5 years at a time.
|Returns||7.90% p.a.||8.50% to 8.80%||No assured return|
|Maximum Investments||Rs.1,00,000/-||No Limit||No Limit|
|Amount eligible for deduction||Rs.1,50,000||Rs.1,50,000||Rs.1,50,000|
|Taxation for Interest||Tax Free||Taxable||Dividend & Capital Gain tax free|
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