Should I chose NPS?

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Deal Subedar
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My employer is enabling us to use NPS that can be linked via payroll.

1. Is it good to chose NPS? How has your experience been, rate of returns?
2. SHould we switch from EPF to NPS or continue with both parallelly?
3. Will be glad if someone can explain the taxation and withdraw cycle as I found it to be complex at the time of annunity.

5 Comments  |  
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Critic
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what is your monthly salary
are you only member of EPF or also member of EPS-95 as part of EPF

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Deal Lieutenant
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1. Is it good to chose NPS? How has your experience been, rate of returns?
Yes, NPS is good, you can save more tax. If you are in 30% tax bracket or will be in future you should opt for NPS. Rate of returns may be average 8-10%, depends on your scheme and fund performance. If you consider tax saved as income then rate of returns would be very high.
For eg. if you are in 30% tax slab then you would be saving Rs15000 by investing Rs50K in NPS.

2. SHould we switch from EPF to NPS or continue with both parallelly?
Run parallel

3. Will be glad if someone can explain the taxation and withdraw cycle as I found it to be complex at the time of annunity.
A person on maturity at the age of 60 would be able to withdraw up to 60 percent of the corpus without payment of tax. The balance 40 percent of the corpus would have to be compulsorily used to buy an annuity plan. The annuity received is taxable in the year of receipt.
Partial withdrawal and taxation are complex.
Many articles explain tax benefits and implications, go through them, you would understand after going through 2-3 articles.

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Deal Cadet
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NPS tier 1 only give extra tax benefits up to 50k . Its Annuity plan .

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Critic
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The main difference between NPS & EPF is that in NPS you can invest upto 50% in equity & any top nps fund manager should easily get you good returns over 20-30 years period so if you plan on investing in MFs anyway then NPS can be considered as just another MF but more secure(as it is pension funds so NPS fund managers are strictly instructed by the govt to not take risks & invest only in tier-1 stocks). However do note that NPS has 3 categories—equity,corporate debt(this is the sector hit by ILFS scam though extent is lower compared to other retirement funds & debt MFs) & gilt(govt security papers,almost 100% secure as backed by govt of India but less return over long period).

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Deal Cadet
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NPS is good if you work in public sector or long may be till retirement.
Business personals, working for short period wont have that much benefit of NPS

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