Investing in NPS

I am invested in NPS for the past 5 years. The only problem with NPS is you can’t withdraw fully before 60, and even post 60, you can’t withdraw full amount as 40% has to be kept in for annuity plan. NPS gives you additional 50k tax benefit under 80CCD(1B). If your company has option for NPS then, your tax benefit further increases. 5% or 10% of basic salary can be opted if your company has additional NPS option, which comes under 80CCD2.

Partial withdrawal is possible if you have held NPS over 3 years. You can only withdraw 25% of account value for 3 times till 60 years of age. I had withdrawn some amount during purchase of my apartment. I don’t remember the tax implications. Other than house buying, higher education of children and children’s marriage are the other two reasons which can be used for partial withdrawal from NPS

Currently, I am invested in HDFC fund house under aggressive scheme.

Currently, XIRR for FY 23-24 is 17.96%, which I feel is decent enough.

FY 2020-21 gave me 20.21% returns for that fiscal.

In my opinion, if you have 50K per year to invest apart from equity, savings, gold, etc, you should go for it. The only problem is no option for withdrawal except special cases.

NPS is a wonderful product and I am personally a fan of it. Few things to keep in mind:

1. NPS becomes extremely lucrative if you are in the 34% or 36%+ tax slabs. Not opting for NPS means your money has to outperform NPS by a wide margin for you to breakeven.

2. Making changes to your asset allocation doesn't trigger a tax hit. Feel markets are overvalued and want to lock in the gains on your portfolio? Move everything to govt securities without paying a penny in taxes.

3. On withdrawal, 60% is tax free but the remaining 40% is also under your control. Post retirement once earnings stop, you will automatically be at a lower tax bracket. Structuring your annuities the right way may mean most of your income will not be taxed.

4. eNPS platform is robust and light years ahead of govt portals like EPFO. Professionally managed by selecting private sector fund managers is a big plus.

Considering the tax advantages, NPS is the top performing asset in my equity portfolio currently.

I started investing in NPS 3 years back to get that additional exception of 50k on taxes. It's not bad, average 10% returns so far.

You can do so from brokerage apps like Grow, ETmo ey, etc or also from your own online banking as well.

If the sole focus is on retirement then you can also check more plans on Policy Bazar or such apps, they have more returns then NPS.

NPS is good, I invested in last 2 years, total 20k gains on 150k investment, using hdfc fund manager with custom allocation.

It’s a no brainer. You invest 50K. And getting 15K back as tax benefits (assuming 30% bracket). And getting 14-15% xirr is not difficult in NPS.

In fact if your company allows, use corporate NPS too where u can’t save additional 1.5 L