As the financial waters flow and change, young earners in 2024 will face different opportunities and challenges in personal investment. Whether you’ve just started earning or have been generating income for several years, mastering wealth management is key to building a foundation for long-term financial success and security.
Here are some investment tips for young earners in 2024 to help you navigate modern investing.
Start Early with NPS for Maximum Returns
The National Pension System (NPS) is an ideal choice for young earners looking to build a substantial retirement corpus. Starting early allows you to leverage the power of compounding, where your investments grow over time. By investing consistently from a young age, you can maximize your returns and secure a comfortable retirement.
Why Invest in NPS?
Thе National Pension Schеmе, launchеd by thе Govеrnmеnt of India, is a voluntary contribution pеnsion systеm dеsignеd to providе sustainable retirement income to all citizеns. It opеratеs on thе principlе of rеgular contributions during thе working yеars, with thе accumulatеd corpus utilisеd to providе pеnsions during old agе. Eligiblе individuals can open an NPS account and start contributing towards building thеir rеtirеmеnt corpus.
Tax Benefits for Self-Employed Individuals
You can invest up to 20% of your gross annual income in NPS. This amount, up to ₹1.5 lakh, is eligible for a tax deduction under Section 80CCD (1) of the Income Tax Act, 1961.
Additionally, you can invest an extra ₹50,000 and claim tax deductions under Section 80CCD (1B).
Tax Benefits for Salaried Individuals
You can invest up to 10% of your salary (Basic + Dearness Allowance) in NPS. This amount, up to ₹1.5 lakh, is eligible for a tax deduction under Section 80CCD (1) of the Income Tax Act, 1961.
On top of this, you can invest an additional ₹50,000 and claim a tax deduction under Section 80CCD (1B).
Tax Benefits for Salaried Individuals under Corporate NPS
For employees enrolled in the Corporate NPS scheme, there are additional tax benefits on contributions made through the employer. Investments of up to 14% of your salary (Basic + Dearness Allowance), up to a maximum of ₹7.5 lakh, are deductible from your taxable income under Section 80CCD (2) of the Income Tax Act, 1961.
Comparison of Investment Outcomes Based on Starting Age
| Young starter | Early starter | Late starter | |
| Age at which began investing | 20 | 30 | 40 |
| Monthly Investment | 7500 | 10000 | 15000 |
| Total investment | 36 Lacs | 36 Lacs | 36 Lacs |
| Corpus at Age 60 years | 4.78 crore | 2.27 crore | 1.14 crore |
* Assumed rate of growth at 10%
Conclusion
As seen, despite all three having the same total investment of ₹36 lakh, beginning at a young age significantly enhances the final corpus. The prospect of personal investment may seem both overwhelming and exhilarating, but with the right approach, young earners can effectively achieve their long-term financial and retirement goals.
