Saving for 80C ? make every Paisa count... Invest in PPF

Make Wise Decisions.. Start Saving in Public Provident Fund (PPF) today

PPF is suitable and recommended for all age group as it induces voluntary savings in individuals. It helps create “MAGIC” with simple and disciplined steps. 

1) Say you wish to create a corpus for your child, say from his current age of 5 years till he/she turns 21 years. 

What you need to do?

•   Simply make an investment in PPF of Rs.1,00,000/- every year ( or Rs 8,000/- pm) for the next 15 years.

•     Importantly between 1^st and 5^th of any month for every financial year for the duration.

Result: You would give your child a tax free corpus of Rs. 29,32,428/- when he turns 21.

2) Or you wish to create a healthy retirement corpus through PPF

What you need to do?

• If you are presently 40 years old and can set aside Rs. 2,00,000/- per year to be invested in your and your wife’s PPF account respectively .

•  Follow the same method as stated in case 1 of investing between 1^st and 5^th April of every financial year for the next 20 years till you retire when you turn 60 ( i.e. tenure of 15 years + 1 block extension of 5 years )

Result: By the time you are about to step into your sunset years, the retirement corpus you would be getting is Rs.98,84,584/-.( i.e. almost Rs.1 crore)

LETS LOOK At PPF in detail....

What are the features of PPF?

•  It is a long term tax saving investment option and gives tax free corpus on completion of its 15 years of tenure.
•  The annual rate of return is at 8.7% for the current financial year. The returns are reset every fiscal year and are bench marked against the 10-year government bond yield. The rate of interest is compounded annually
• Only Indian citizens can open a PPF account. NRIs and foreign nationals are not permitted to do so. 
• PPF account can be opened in any nationalised bank or post office.
• The minimum investment under PPF is Rs 500 p.a and can go up to a maximum of Rs 1 lakh p.a. This can be made as lump sum or in installments, up to a maximum of 12 in a year.
• A PPF account can hold only one PPF account in an individual’s name and cannot be a joint account.

Benefits of Investing in PPF

•  Being a sovereign backed instrument, PPF offers the highest level of safety with assured returns.
• PPF account cannot be attached under any court order with respect to any debt or liability of the account holder.
•  Once the 15-year tenure has been completed, the account holder can extend it by 5-year blocks as long as he/she desires. 
•   Though the lock-in period is 15 years, investors are permitted premature withdrawals after a certain period. A Loan facility is also available.
•  Investments in PPF offer a deduction under Section 80C of the Income Tax Act up to a maximum of Rs.1,00.000/- to an individual.
•  The principal amount invested gets a tax deduction. The interest earned is also tax free. On withdrawal, the principal and interest accumulated are exempt from tax. Thus, it comes under the EEE category (i.e. Exempt-Exempt-Exempt from tax at all stages).

Thanks and Regards

Team

Saarthi Financial Planner

Email: saarthifp@gmail.com

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All you wanted to know about the NPS

What is NPS?

NPS stands for National Pension System. The National Pension System (NPS) is a defined contribution based pension system launched by Government of India with effect from 1 January 2004 for all government employees and in 2009, for all the general public.

Why was NPS started?

Like most other developing countries, India did not have a universal social security system to protect the elderly against economic deprivation.

As a first step towards instituting pension reforms, Government of India moved from a defined benefit pension to a defined contribution based pension system.  Apart from offering wide gamut of investment options to individuals, this scheme would help government of India to reduce its pension liabilities.

What is need for Pension?

A pension is source of regular income post ones retirement. It is necessary to match the rising living expenses, rise in nuclear families and increase life expectancy.

How does NPS work?

v  NPS has the following bodies/ people associated with it:

a)      Regulatory Body: Pension Fund Regulatory and Development Authority.

b)     Point of Presence: Most of the Public & Private Banks, financial intermediaries responsible for Sales & Marketing.

c)       Provident Fund Managers (PFM): Responsible for making the investments.

d)      Central Record Keeping Agency (CRA): Responsible for back office and administrative processes.

How to start investing?

Step 1: So as an individual, we need to approach the POPs, who offer NPS services. (For complete list of banks please visit:  https://www.npscra.nsdl.co.in/pop-sp.php) to start your NPS account.

v  What are the fund options available for NPS?

Active Fund	Auto Fund
Investor has a right to choose the asset class he wants to invest into either in Equity (E) or Government Securities (G) or corporate Bonds (C)	This fund is best suited for people who don’t have basic knowledge of investment and time to review it.
The maximum amount allowed in equity and equity based instruments is 50%	The funds get allocated as per one’s age in a predefined format.
The investor has to choose his allocation from the available PFMs at the time of investment. He can change the same at later stage.	The investor is required to choose a PFM even in Auto Choice Fund.

Step 2: On submitting the required filled form with the POPs, the CRA would generate Permanent Retirement Account Number (PRAN) number to the subscriber. The same acts like a unique identification for all future correspondence and complaints. The detailed process can be obtained on the home page of any of the POPs. The details of various fund charges and allocation cost break up would also be available with them.

Features of NPS

v  Who all can invest in NPS?

·         Citizen of India (between 18 – 60 years). Even NRIs (Non Resident Indians) can invest in NPS subject to regulatory requirements under RBI and FEMA.  

v  What is the investment limit?

·         Minimum amount per Contribution – Rs 500/-

·         Minimum Contribution per year – Rs. 6,000/-

·         No of contributions per year - 1

There is no upper limit on the investments per year.

v  Tax Benefits

·         Tax deduction available under section 80C of the Income Tax Act 1961.

v  Withdrawal from NPS

In case of death, the funds can be 100% withdrawn by the nominee. However, if the subscriber otherwise wants to withdraw funds, the following rules are applicable:

·         Before 60 years – 80% of accumulated wealth needs to be annuitized (with any available annuity scheme provider) and 20% can be withdrawn lump sum.

·         On attaining 60 years – 60% can be withdrawn in lump sum or phased manner (before attaining 70 years of age) as desired. 40% needs to be annuitized on maturity. 

What Saarthi FP would like to add?

National Pension Scheme works similar to any Unit Linked Plan. It is good for people who don’t have time to monitor their investments on regular basis or are unable to maintain the disciplined investments. It is good to have retirement savings in an asset class which can fetch better returns. However, it should not be used as an alternate to PPF or Direct Equity or an instrument to get deductions under Section 80C.  


Bookmarks:

NPS Official Website :  http://pfrda.org.in/

CRA Official Website : https://www.npscra.nsdl.co.in/

Link on India's Official Website : http://india.gov.in/spotlight/national-pension-system-retirement-plan-all

Thanks and Regards

Team

Saarthi Financial Planner

Email: saarthifp@gmail.com

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IRS - The first of its kind in the world.

Now access all your insurance policies online through Insurance Repository. This system will enable policy holders to buy and keep insurance policies in dematerialized or electronic form (e-Policies).

IRDA has licensed five entities – NSDL Database Management Ltd., Central Insurance Repository Ltd., SHCIL Projects Ltd., Karvy Insurance Repository Ltd., and CAMS Repository Services Ltd. – to act as Insurance Repositories (IRs)

To read in detail please visit IRDA's website to go through their press release

 

Thanks and Regards

Team

Saarthi Financial Planner

Email: saarthifp@gmail.com

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