Inspite of NPS being launched for the last 2 years, it has not been able to garner attention of the investor fraternity. Hence to promote it, the Government of India has announced that it will add Rs 1000 co-contribution every year for the next three years for everyone who joins the New Pension Scheme. Those who invest Rs 1,000-12,000 per annum between April 1, 2010 and March 31, 2011, will get the additional fund allocation from Rs 100 crore set aside for this scheme. Thus, any NPS subscriber will end up getting Rs 3,000 free from the government.
The revised DTC which will introduce several changes if implemented has brought NPS under the tax exempt net. This new change will make NPS an attractive investment opportunity. The government has proposed EEE (exempt-exempt-exempt) method of taxation for NPS - exemption at all the three stages of deposit, appreciation and withdrawal. Earlier, the withdrawals from the NPS were taxed. This brings it at par with the other long term investment avenues. Outlined is a brief snapshot of the product and also the impact of the change announced by the recently revised DTC.
Inspite of NPS being launched for the last 2 years, it has not been able to garner attention of the investor fraternity. Hence to promote it, the Government of India has announced that it will add Rs 1000 co-contribution every year for the next three years for everyone who joins the New Pension Scheme. Those who invest Rs 1,000-12,000 per annum between April 1, 2010 and March 31, 2011, will get the additional fund allocation from Rs 100 crore set aside for this scheme. Thus, any NPS subscriber will end up getting Rs 3,000 free from the government.
Charges paid for starting NPS
NPS has the lowest administrative charges and fund management charges. The fund management charges are capped at 0.0009% and custodian charges in the range of 0.0075% to 0.05%. To put this figure in perspective, pension fund managers (PFMs) will charge Rs 9 as fund management fee under NPS for managing Rs 10 lakh
However, there are other costs involved like the Cost of Opening an Account (Rs.50), Annual Maintenance Charge (Rs.350) and a Per Transaction Charge of Rs.10. Further one has to pay Rs 40 for registration and Rs 20 per transaction at points of presence. The charges would come down once number of accounts opened increases. This is still cheaper than charges of mutual find and ULIPS.
source: bankbazaar.com
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