Should I chose NPS?
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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.
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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.
NPS tier 1 only give extra tax benefits up to 50k . Its Annuity plan .
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).
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
Thank you for all your suggestions. Glad I made the choice to join NPS 1.5 years back. The portfolio has been at 20%+ XIRR returns.
Who is the fund manager? What choice did you choose? and what fund? can you elaborate?
the amount is taxed at retirement. so its ony tax deferral not tax exempt
Yes, it is tax deferment in a way. But still, we can use that 30% of the tax to invest today and hope the returns generated by this 30% (which would have been deducted as tax) will be able to cover the tax at maturity which is also staggered and not taxed at once. So I feel it is a better option for who is not into equity/MF investment by himself.
Depending on your need you will have to take call for below
1. To continue with both EPF and NPS
2. To Just have NPS
NPS will give you 50K of additional Tax benefit apart from what your employer will contribute to NPS account
NPS you can select the split between Equity/Government/Corporate Bonds ..so rates are market driven unlike fixed PF returns
NPS you cant withdraw the full amount post retirement, you will have to compulsory take annuity plans amount from that will be part of your income (assuming you retire and dont have any other income post 60 or so…One can safely assume that this amount will be within tax free bracket.
NPS you cant withdraw funds in case of emergency (PF allows much more flexible withdrawal)
Over the time NPS will outperform PF returns.
Right now continuing with both as EPF is still mandatory and NPS is optional by the employer.
Yes, I am aware at maturity, 40% has to be invested in annuity plans(low returns and taxable). But considering 30% tax savings and average >10% CAGR returns on NPS investment. I have opted for NPS as well.
If you are actively involved in stock markets then no need of NPS as the returns of NPS would be low.
NPS is for retirement and we are talking of a 25 to 35 years plus term.
Nps tier 2 tested benefit anyone?
Invested, yes. Tested, no. Will tell you results of investment after 20-25 years
Thanks since i fall in the 30% tax bracket, will definetely start putting 50k every year from this FY
You may want to consider APY along with NPS.
I found this video interesting, he suggests that returns in NPS and APY are almost similar using a calculator (NPS is slightly better), also tax savings are in the same sections so if you are investing in NPS, there is no need to invest in APY.
Can you please highlight the extra benefit of APY if we already have NPS and making 50K contributing for 80CCD1?
what is the additional gain in tax or returns in APY?
I am ignoring APY coz after 30 years in 2055 , 5k per month will have no value considering the inflation
APY is mainly for low income people who cant invest in NPS
It’s not only 5k per month… It’s lifetime of 5k per month for you, thereafter your spouse and then tax free sum to your children. Across a time horizon of 15 years from date of retirement, this is equivalent to 10.25%-10.5% guaranteed returns starting with 9 lakh in 15 years towards pension and then 8.5Lakh plus for nominees. All of this on an investment of 1,05,840 over 42 years for an 18 year old.
1 more benefit – saw – we can use credit card for NPS
so i can get 3.75% on my bob eterna card as cashback = 1750 rs
Tried mobiwik amex card to get 2% extra but it did not work
what is your monthly salary
are you only member of EPF or also member of EPS-95 as part of EPF