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Are you worried about your retirement? Don’t know where to park your hard-earned money for a stress-free retirement life? Do not worry. This article discusses everything you need to know about the most preferred investment options for retirement and the benefits it offers.
Calculate monthly Pension & Tax Benefits through Cleartax NPS Calculator
SIP in mutual funds in one of the most preferred investment options among millennials today. Through a SIP, you will be able to invest a fixed amount in mutual funds regularly. The amount mandated for financing will be debited from your account every month and utilised to buy units of the mutual fund you opt to invest in.
The Central Government introduced the National Pension Scheme as a social security initiative for individuals employed in the private, public, and unorganised sectors. Under this scheme, you will be required to allocate a certain amount from your income towards a pension account during the employment period regularly. At the time of maturity or retirement, you will be eligible to withdraw a certain percentage of the total corpus. The remaining portion of the corpus will get credited to your account in the form of pension monthly.
The lock-in period applicable for ELSS is set at 3 years. NPS, on the other hand, will allow you to withdraw the corpus only after attaining 60 years of age or at the time of retirement.
Both NPS and SIP investments are eligible for tax deductions under Section 80C of the IT Act, 1961.
NPS: An NPS subscriber will be eligible for tax benefits up to Rs 1.50 lakh of the gross income under Section 80CCE of the IT Act. Additionally, you can also avail tax benefits up to Rs 50,000 on their investment towards NPS (Tier I account) under subsection 80CCD (1B) of the Income Tax Act, 1961.
SIP on Mutual Funds: To avail tax benefits for SIP in mutual funds, you will be required to invest in ELSS, i.e. equity-linked savings scheme. Under Section 80C of the IT Act, taxpayers are eligible for deductions up to Rs 1.50 lakh on investments made towards ELSS in a financial year. It is advised to consider your financial goals before deciding the type of investment you would like to make.
NPS can be the best bet for individuals who wish to plan a stress-free retirement life. ELSS, on the other hand, is more suitable for individuals who are looking to save funds for their short-term financial goals. Click here if you want to know more about investing in real estate investments as compared to mutual funds.