Tax benefits in NPS!

Tax benefits are important. You want to ensure that you get the benefits at every stage such as on investment, on accruals and on redemption. Each product has its own tax advantage and National Pension System (NPS) is a product that stands out in this aspect. To begin with, NPS is a low-cost, market-linked, retirement corpus accumulation tool. NPS was launched in 2004 for government employees. In the year 2011, it was made available for employees from the private sector as well. There are two types of accounts under NPS – Tier 1 and Tier 2. Tier 1 account is the one where you are eligible for tax advantages. Tier 2 account is a simple investment management account. Tier 2 account is not eligible for tax benefits. There are four asset classes available, in which you can allocate your investment - Equity referred to as the ‘E’ category, Corporate Bonds which is referred to as the ‘C’ category and Government Securities which is referred to as the ‘G’ category. The fourth asset category is Alternate Investments referred as ‘A’. This plan invests in Alternative Investment Funds (AIF Category I and II), Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), Basel III Tier 1 bonds and securitised papers.