NPS has two major tax benefits, self nps contribution has only 50k tax benefit (above the usual 80c), that too only for Old Tax regime. But if you have the option of availing employer’s nps portion (under 80CCD(2)), which gets you benefit of upto 14% of Basic (or 7.5 lakhs-PF, whichever is lower) under New Tax regime, and 10% under Old regime. So what do you think, is it worth it?
Personally, as of now, I am still not convinced of its worth, primarily due to two factors- (1) You can never withdraw entire amount (2) The 40% you reinvest post 60 yrs, which shows to get you pension of, say 50k/month, is all with so much of assumptions, and even then it looks small value compared to the 40% they are forcing you to keep invested. I mean if you invest 1 crore in FD, may be you get more than that pension! So unless they guarantee some minimum pension amount (even very low), it looks all so dubious, like some chit fund scam.
So what do you think, would you go for NPS, if you are getting employer’s portion part, with tax benefit under 80CCD(2) ?
I did a quick calc comparing nps to investing in conservative bond+equity hybrids over a period of 30 years. Not worth it simply for the fact that money is locked till retirement and the pension amount will be too little when factoring inflation.
Yes, that’s my main point of contention too. That’s why I never opted for it till now. But now I am having to pay fat taxes, and I am having to reconsider a bit.
If you are paying 10 lakhs tax, you pay only 8 lakhs tax if you use this. Just that you need to deposit 3-4 lakhs in NPS. (Just a rough calculation above).
So the competing thought is, is it worth it, to deposit 2 lakhs in NPS, to save 1 lakhs tax? That 1 lakh tax paid, will never come back, but the 2 lakhs NPS deposited “may” come back. That’s why I am still a bit undecided on this.
Similar mindset to you OP - taxation rules can change making it harder to take out the money. Also, inflation-linked annuities aren't there yet in the Indian market so buying them and making a reasonable assumption on future inflation is a guessing game. I do not trust the govt stats on this. There is a reason why many states are reverting to the old pension scheme and which RBI is worried about. Hence, not investing in NPS
Exactly, my 3rd reason of apprehension is that same- that it is Govt scheme, and Govt schemes are always so shady, with so much of redtape. We are already reading so many news about people facing issues with withdrawing NPS amount when they approach those guys. Complete rotten system. And yes, the ever changing tax schemes too.
But then, I am still in two minds on this. If you are paying 10 lakhs tax, you pay only 8 lakhs tax if you use this. Just that you need to deposit 3-4 lakhs in NPS. (Just a rough calculation above).
So the competing thought is, is it worth it, to deposit 2 lakhs in NPS, to save 1 lakhs tax? That 1 lakh tax paid, will never come back, but the 2 lakhs NPS deposited “may” come back. That’s why I am still a bit undecided on this.
Consider investing in NPS and taking the tax benefit (however locking money until 60 atleast) vs investing in mutual funds.
Please share your thoughts if its worth the tax benefit.
I am planning to invest in National Pension Scheme. Is it a wise decision or any better options for retirement planning? And if you have already invested pls suggest which one to invest in.
Please let me know your views if you have inv...
Hey folks, I’m amidst planning my taxes. I believe one can save more in taxes if invested in national pension scheme under 80CCD.
I have already opened a NPS tier-1 account with PRAN ID generated. The only thing that is keeping me away...
