Dear Admin,
I am a 29 year old Corporate employee, unmarried. My employer contributes towards EPF, however, they dont provide the option of National Pension Scheme which is mostly offered to Govt.employeers. I want to ask is it worthwhile opening these NPS accounts. Though the Govt. doesnot contribute towards this scheme, I under stand, the money generated out of this investment is meticulously invested to generate the Pension wealth with the minimum risk for the subscriber.
Also, the plan looks flexible as the contributor has to invest minimum Rs 6000 in a financial year and minimum Rs500 at the time of opening the account. Also, the contributor can avail tax benefits. We need your expect thoughts on this.
Thank you for your support. Navjot
1 Answers
Hi,
I believe that investing in Mutual Funds as per your Financial goals can be more beneficial and a prudent thing than to invest in NPS. Below are some disadvantages;
- Equity exposure is capped at 50% & the retirement age is fixed as 60 years. Why should you restrict your investments in equities to just 50%?
- Terms & conditions: A lot of rules & limits are applicable for pre-mature withdrawals, withdrawals at retirement & on buying of annuity products. Buying of annuity product is a must (The quantum of investment in Annuity product depends on WHEN you choose exit from the NPS account).
- The NPS subscriber can get income tax benefits under Section 80CCD & 80CCD (1b) on the contributions, but the maturity proceeds are taxed when exiting the scheme. So, NPS falls under E-E-T category (exempt on contributions made, exempt on accumulation, taxed on maturity) (Also, the contribution to Tier-I account is only eligible for tax benefits) (Budget 2016-17 has made a proposal to make 40% of withdrawals at the time of retirement as tax-free. The remaining 60% of corpus has to be used to buy an annuity product)
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