National Pension Scheme (NPS) – Why it is not a good Investment Option?

The Government of India rolled out the National Pension Scheme (NPS) for all the citizens of India from May 1, 2009 and for corporate sector from December, 2011.Any individual whether employed with private sector, self employed or professional can avail of pension benefits and plan his or her retirement by enrolling in this scheme.The person (employee/citizen) who joins the NPS will be known as “Subscriber” in the NPS. Under the NPS, each Subscriber will open an account with Central Record keeping Agency (CRA). This account is identified through unique Permanent Retirement Account Number (PRAN).The Centre made NPS scheme mandatory for all the employees who joined the service on or after January 1, 2004. It has since been adopted by most state governments also. Currently, NPS has more than 1.13 Crore subscribers with total Asset under Management (AUM) of more than Rs. 1.09 lakh crore.Most of my blog readers have chosen NPS for two main reasons – i) for tax saving purpose & ii) No other choice than to invest as contribution to NPS has been made mandatory for the Govt employees.Unfortunately, majority of the subscribers are not aware of ‘how NPS scheme works’ and invest in it just to save some taxes. Most of us are eager to know about the tax benefits that are being offered while contributing to NPS but are not worried about the applicable taxes at maturity.In this post, let’s understand – Is NPS a good investment option? What are the drawbacks of National Pension Scheme?

National Pension Scheme – Why NPS is not a good Investment?

A long-term investment option for your retirement planning should ideally have below features;
  • It should be simple and easy to understand
  • Should be flexible
  • Should have high liquidity
  • Should be a tax efficient product and ideally should fall under Exempt – Exempt – Exempt category.
  • You should be able to withdraw the whole corpus at the time of retirement and you should be allowed to re-invest the corpus as per your choice/requirements.
Retirement planning is a long-term goal, so when we are investing for a longer period, I prefer to invest in a simple, flexible, easy to understand, tax efficient & highly liquid investment option.According to me, National Pension Scheme is not a great investment option for your retirement goal. It does not meet any of the above criteria. Let’s understand why it is not a good choice;
  • Lock-in Period : National Pension Scheme has a high lock-in period. The retirement age is fixed at 60 years. You can not withdraw the entire corpus till your reach 60 years of age. If you look at other tax saving investment options like PPF, ELSS, EPF, NSC etc., then they all have low lock-in period. PPF has a 15 year lock-in period, 3 year lock-in period for an ELSS fund, you can withdraw EPF if you are unemployed for 2 months and so on.
  • Pre-mature withdrawal : Up to 10 years, no partial withdrawals are allowed. Partial withdrawal up to 25% of own contribution (excluding contribution from the employer) only is allowed after 10 years for defined expenses. In the latest rule change, PFRDA (Pension Fund Regulatory And Development Authority) has relaxed the withdrawal norms to the effect that now the subscribers can withdraw upto 25% of contributions starting from the third year of opening of NPS (National Pension System) account. These revised NPS Partial Withdrawal rules are effective from January 10, 2018.
  • Withdrawal at maturity : After attaining 60 years of age, you are allowed to withdraw only 60% of the total Corpus amount.
  • Annuity Plan :
    • At least 40% of the accumulated wealth in the NPS account needs to be utilized for purchase of annuity/pension plan when you turn 60 years.
    • Let’s understand this with an example : If your total corpus is Rs 100 at the time of retirement (60 years), you can withdraw Rs 60 as a lump-sum amount and Rs 40 (minimum) has to be used to buy an Annuity plan from a Life insurance company. Out of the sixty rupees, Rs 20 will be taxable as per your income tax slab at the time of retirement
      • (Latest update : Dec 2018 – W.e.f 1st April, 2019, this Rs 20 would also be tax-exempt) and the Rs 40 is tax-free amount. From FY 2018-19, this partial tax-exemption on NPS withdrawal is now extended to self-employed individuals also .
    • Kindly note that the taxes are applicable on the corpus amount and not just on the Gains. (The minimum quantum of investment in Annuity product depends on WHEN you choose to exit from the NPS account).
    • If you invest Rs 40 (lump sum) in an Annuity plan offered by a life insurance company, they in-turn will give you pension/annuity at periodic intervals. Unfortunately, even this annuity income or pension income is taxable as per the current laws.
    • Annuity income is taxable under the head ‘income from other sources’. Why do you want to receive an income which is chargeable to tax during your ‘retirement age’?National Pension Scheme - How NPS Scheme works - Example - Illustration pic
  • NPs falls under EET Category : The contributions made during the accumulation phase are exempt from income taxes, the returns earned during the accumulation phase are exempted but at maturity the corpus amount (60%) is subject to taxes. Latest Update (Dec 2018) : This 60% withdrawable corpus is made tax-exempt w.e.f. April, 2019. So, we can consider NPS under EEE category. But, do note that Annuity income earned is still a taxable income. 
    • The contribution to Tier-I account of NPS is only eligible for tax benefits.
      • Latest Update (Dec 2018) : Contribution by government employees (only) under Tier-II of NPS will now be covered under Section 80 C for deduction up to Rs 1.5 lakh for the purpose of income tax provided there is a three-year lock-in period. This is w.e.f April, 2019.
    • Low Annuity rates :
      • The annuity rates offered by the life insurance companies are pretty low.  Kindly remember that the pension amount is dependent on the annuity rates.
      • What is annuity rate? – In return for a lump sum; the money you have saved in your pension pot, an annuity provider (insurance company) will give you an annual income for the rest of your life.
      • The yields on annuity products offered in the market today are in the range of 5 to 7% only. This is low when compared to other conservative products like Debt mutual funds, Senior citizens Savings Schemes, Post office MIS, or MF MIP Schemes etc.,
      • So, low annuity rates (pension rates) may not beat inflation.
      • I personally believe that it is like you accumulate wealth and lose all the wealth to Annuity Plan Provider.
    • Types of Funds & Allocation :
      • NPS Scheme has three different types of Funds – i) Equity fund, ii) Corporate Bonds & iii) Government Securities. Under Equity Fund option, subscriber is allowed to invest only up to 50% of contribution amount. When you are investing for longer period, why should you restrict your equity exposure to just 50%? In case of Govt employees, the total equity portion of the tier I account cannot be more than 15% (increased up to 50% w.e.f. April, 2019).  Government employees also do not have the option to change the contributions made to each fund.
      • Latest Update (29-Nov-2016): The existing ‘Life Cycle Fund’ with 50% max equity exposure is renamed as ‘Moderate Life Cycle Fund’. The new allocation option would be ; 50% equity exposure till the age of 35 and reduces it by 2% every year till the age of 55.  A new fund option called ‘Aggressive Life Cycle Fund (LC-75)’ has been introduced. The fund invests 75% in equities till age of 35 and then cut exposure by 4% every year. The cuts will slow down to 3% per year between 45-50 years and to 1% per year between 50 and 55 years.
      • Latest update (04-March-2017) : With effective from 1st April 2017, NPS subscribers can change their investment option and asset allocation ratio ‘twice’ in a year than the existing once in a year.
    • Equity funds Investment Strategy : Till last year (2015), equity funds of NPS were mirroring the returns of the index because pension funds were supposed to invest in index stocks (Large Cap Stocks) only. But from September 2015, fund managers (SBI/ICICI/UTI/LIC/HDFC/Kotak/Reliance) have been allowed to invest in a larger universe of stocks and follow an active investment strategy that does not mirror the index. But, most the fund managers are yet to follow or implement these new guidelines. Most of the funds do not even have more than 10% of their equity corpus allocated to non-nifty stocks (mid-cap stocks).
If it is mandatory for you to contribute to NPS then you do not have any choice but to contribute. If you want to make voluntary contributions then I believe that NPS is not a great investment avenue. (Read : List of Best Investment Options)If maturity proceeds are not taxed, and if buying an annuity product is made optional then National Pension Scheme can be a better option. But as of now, it is a complex and less tax-efficient long-term investment option.Do you prefer NPS to other investment options like Mutual funds? Kindly share your views on NPS.(Image courtesy of Mister GC at (Post published on : 22-July-2016) 
  • Rohit Singh says:

    Hi Sreekanth,

    I am 28 and I had started contributions to Superannuation Fund six years back. Now,an option has arisen in my company to opt out of it and transfer all its accumulations to a NPS account.

    I desperately want to close my superannuation account and withdraw all its accumulations but since that is not possible,should I create a NPS account and then transfer all the SAF’s accumulated money to it.

    PS: The growth of money in the SAF has been pathetic – 25% over the course of 6 years.

    Thanks in advance.


  • Sankar Kumar R says:

    Hi Sreekanth,

    I am 34 & I have exhausted my 80C limit through PF contribution, ELSS (Axis), Term Insurance & Home loan.

    I have 2.5k monthy SIP running in each of the following MFs:
    1) SBI Magnum Midcap Fund (G)
    2) Mirae Asset Emerging BCF (D) (G)
    3) SBI Small Cap Fund (D) (G)
    4) Motilal Multicap 35 Fund (D) (G)
    5) SBI Small Cap Fund (D) (G)

    As i am in 20% tax bracket, should i invest 50k in NPS to save tax.
    Else suggest some retirement corpus options with free will to withdraw the money.

    Thanks in advance.
    Sankar Kumar.

  • S.D. SARKAR says:

    I m west Bengal state government employee. No nps schem provide for wb govt. Employee in wb govt rules.
    Can I invest in NPS scheme individual ?

  • Yogesh says:

    Hi Sreekanth, Thanks for the great article. Please provide some details on Rate of Return of NPS. Thanks.


    Hi Sreekanth,

    Thanks for this article. My question is with regard to additional tax benefit for investment up to Rs 50,000 in NPS. I am a government employee, already having nps tier 1 account so if I invest Rs.50k in tier 2 for additional tax benefit then, when can I redeem this amount from tier 2 ? Is this amount under lock-in-period ? how much ? As far as I know, in tier 2 account, the subscriber can deposit and redeem any time so, is there anything special about this investment of Rs.50k ?

    • Sreekanth Reddy says:

      Dear Pankaj,
      Contribution by government employees (only) under Tier-II of NPS will now be covered under Section 80 C for deduction up to Rs 1.5 lakh for the purpose of income tax provided there is a three-year lock-in period. This is w.e.f April, 2019.

  • Sheel Kamal says:

    That is quiet an information. I did recently hear about NPS and I was planning to invest in it. And the of course I though of it just considering the immediate Tax exemption. Now I have clarity on this product and I do not want to go for it.
    Thank you Sreekanth.

  • Vishal says:

    Will 40% principal amount invested into annuity be returned to nominee in case of demise of the account holder (say at the age of 70)

  • Vineet says:

    Hi Sreekanth,
    People contribute Rs 50,000/yr towards NPS. I am 29yrs old. If I do SIP of 5-6k per month in small cap funds for the next 30 yrs, do you think that will be the best retirement planning or replacement of NPS?

  • kolukula says:

    HI Sreekanth,

    What is your view on the Tier II in NPS. It is completly flexible with very low expense ratios. Also with new aggresive guideline of 75% in stocks is it not the best investment option

  • Ajay Mokani says:

    Dear Sir,

    I want to invest Rs.20,000 per month through SIP mode for short capital gain in option to FD/RD, so request you to suggest suitable Debt fund(Short Term,Ultra Short Term, MIPs ,Liquid)

    Ajay Mokani

  • Manish Ochani says:

    Hi Sreekanth,
    I am 35 & I have exhausted my 80C limit through Employee PF,School fees,sukanya etc.
    I have 15k monthy SIP in good equity MFs , & for debt portion I was investing approx 3k p.m. in PPF which will now offer 7.9% only
    Can i invest in NPS instead of PPF for debt portion of my portfolio , it will also help me save tax as I am in 20% bracket?


  • vijay says:

    My Self Vijay, my age is 40 , from march-2017 i have started investing in NPS. I am planning to invest Rs. 5000/ month.

    Am i doing this correct ??

    Please help ..


  • sadhli says:

    Very nice article Sreekanth.
    I need some guidance with my financial planning:
    I have divided my financial planning in three time parts short (3 years), mid (8 years), long (retirement).
    And I am doing investment in PPF, VPF, ELSS.

    So my doubt is:
    1. all the investment done in ELSS, can it be considered for long term planning or not. If not do I have to plan all three time horizons separately than my tax savings investments.
    2. Balanced-Large Cap-Mid Cap which of these is best for mid term planning ? keeping my 35% investment in Debt, so i want to know where to put rest 65% amount.

    Thanks in advance.

    • Dear sadhli,
      1 – Yes, can be considered for Long term goal(s).
      2 – Large & balanced funds can be considered.

      • Sadhli says:

        Thanks Sreekanth.

        I have done my asset allocation as below:
        a. Retirement: ELSS (Axis Long Term) 70%, VPF 30%
        b. Long Term (10+ years): Large Cap (ICICI Focused Bluechip) 40%, Mid Cap (HDFC Mid Cap) 30%, Debt (UTI Dynamic)30%
        c. Mid Term (6-9 years): Balanced Fund (HDFC Balanced) 70%, Debt (Birla Sun Life Short Term Fund) 30%
        d. Short Term (4 years): Debt Fund (Birla Sun Life Floating Rate Fund) 100%

        1. Could you please review and let me know if any fund needs to be replaced by other or need to be added/removed.

        2. Is it advisable to invest in Dynamic funds in lump-sum instead SIP ?

        • Dear Sadhli,
          You may kindly go ahead with your investment plan.
          Do note that you may have to re-balance your portfolio and move to safer investment avenues (if required), as your goal year nears.
          2 – There is no right or wrong answer.

          • sadhli says:


            As you mentioned to move to safer avenues, like moving to debt from equity, is it possible for you to suggest how that can be planned as I am completely a newbie in this field so would need guidance

          • Dear Sadhli,
            Let’s say your target goal year is 10 years from now.
            Either you can maintain a desired Equity to Debt ratio from beginning and re-balance the portfolio to maintain fixed Debt to Equity ratio.
            You may invest in Equity 100% and lets say after 7 years from now, for the next 3 years you can gradually redeem the equity fund units and mover to other safe avenues (relatively) like Fixed deposits, debt funds, etc. so that the capital appreciation is protected.
            But over these 7 years, you have to continuously monitor your Portfolio value so that you can ensure that expected goal value can be achieved in 10 year period.

          • sadhli says:

            Thanks Again Sreekanth.
            I prefer your first suggestion to keep the Equity – Debt ratio throughout by rebalancing.
            But here too I have concerns (apologies for so many questions as I want to learn this financial planning myself so have many doubts)

            1. For long term goal – If my debt portion is PPF (my PPF will mature in 6 years as its been 9 years with me so far). And we can’t pull out money from it then how can rebalancing be done ? only one way from Equity to Debt ? But then the existing PPF amount will also contribute to the Debt gain in one FY. Then how it can be done ?

            2. If not PPF then which Debt fund is safer for 10+ time window. As I am not sure Dynamic bonds are less riskier than Short Term Debt funds.

            3. Are short term debt funds a good option for 7+ and 10+ window or any other less risky Debt Funds can be looked upon.

          • Dear sadhli,
            1 – You may withdraw PPF amount after 6 years from now and re-invest in other debt products depending on the goal target year. Else, you may extend PPF by 5 more years, again depending on when you require this corpus money.
            2 & 3- For long-term horizon, Dynamic bonds can be a better choice. Yes, they do come with certain amount of risks. PPF is a better choice, if stable returns are of high priority.

  • Amit Verma says:

    Hi Sreekanth,

    I am in 30% tax bracket with close to 35L base salary. I exhaust my 80C with PPF. Now if I take NPS, I can not only deduct 50K with 80CCD(1B) but also 10% of my base with 80CCD(2) through employer contribution. So, I can save 30% tax on almost 4L income…a cool tax saving of 1.2L. So NPS sounds pretty attractive to me….

    What am I missing?


    • Dear Amit,
      Kindly go through the article.
      I prefer to invest in a product which is easy to understand and have greater flexibility.
      Tax saving should not be the sole criteria when choosing a long-term savings product.
      Of-course, NPS may be made more tax-efficient and flexible in near future 🙂 ..

  • Tejal says:

    Hi Shree,

    You mentioned that equity mutual funds are taxable in the beginning , but as per my knowledge if this MF’s is held for more than 1 year they are completely tax free. So just wanted to clarify are equity MF taxable?

  • Adarsha says:

    i dont completely agree with you regarding NPS. When planning for retiremnet is a long term goal, then why a need for a high liquidity? a reasonable amount of liquidity is offered after 10 years even in NPS for real emergencies if they arise.. and it is not mandatory to withdraw 60% as lumpsum, please highlight that as well..

    also i request if u could provide a comparison of NPS with universal pension schemes available in mature economies like US, UK , Switzerland, Australia, Canada.. which have well established pension funds active..

    • Sreekanth Reddy says:

      Dear Adarsha,
      Thank you for sharing your views.
      But my point is simple, given a choice I would prefer an investment option which has high liquidity, easy to understand (do not want to refer to rules book), tax efficient, have more flexibility (investment allocation choices) etc.,

  • Rashmi says:

    Hi Shrikath,

    I am Rashmi here, I usually visit your blogs for clarifying my doubts. Thanks for your effort and keep educate us on financial front.
    I am working in corporate company earning 10lks/anm and my kids are dependent on me . I have planned for 80C and 80D and i have Housing loan paying EMI of 20k per month. I was searching for good pension schemes or pension funds which are tax free after investing for certain years.
    Its very good article from you on NPS. and Going through your blog on NPS, i felt its not worth investing and need to pay tax even after 60 years especially annuities are taxable.
    I would appreciate you if you could advice me an alternative solution for this.
    1. I want to build a corpus fund which would yield good monthly income after 20 -25 years from now on wards

    or any alternative which you could suggest.

  • Vicky says:

    Hi Shrikanth,

    My father is a govt employee and has crossed his 80C limit And 80D he has health insurance too . He is 55 yrs old , now he is entitled to 20℅ tax slab and paying around 80-90K in tax. Since his 80C limit is already crossed And 80D also taken. Do we have any other way to do better tax planning than investing in NPS or NPS seems to be good option for him? He isn’t willing to invest in risk related investments. Otherwise I would ask him to invest in Balanced funds !! His ultimate aim is to reduce tax and shud safeguard the corpus amount 🙂 .. can you tell me is NPS good for him as he s having another 5 yrs if service or any other tax saving option will suit his needs?

  • karthik says:

    I have read this article there are these things that struck me very badly.
    1) Predicting one’s life is very very difficult in this 21 century.
    2) Waiting for 60 years is too long period.
    3) Again buy a Annuity plan is simply stupid idea because 60+ is time to stay at home with all the health problems (these days common) and you wait for a company to pay you monthly money, some amount that too is taxable, a big nonsense.

    • Dear karthik..Agree with your views 🙂

      • karthik says:

        There is one unseen consequences regarding NPS
        4 to 5 years everbody were saying NPS is bad, but now with 50K tag its becoming little attractive.

        What if the govt makes NPS attractive at later stage over the years, then one could feel he should have started earlier .
        Should I test the waters with minimum amount.

        • Dear karthik,
          Personally, I prefer to invest in products which are transparent, tax efficient, have high liquidity and give me control on my portfolio. If the rules are pretty clear in mutual funds why would I like to invest in NPS where product is complex and not tax efficient AS OF NOW…

  • Vijayakumar says:

    Hi Sreekanth, I felt good after reading few articles, since I don’t have the knowledge of SIP. I am CG employee, and earning Rs 53,000 on hand. I plan to buy a apartment (first house) worth Rs 35 L with housing loan for 30L with 30 years and EMI 25 K. Shall I go ahead with purchase or better to invest the same in SIP. Please suggest me.

  • Shiva kumar says:

    Dear Sreekanth

    I was reading through and I believe that 20 pct that is taxable can be withdrawn in tranches over 10 years.
    Age 60 to 70 years. In that case if 2 pct is withdrawn every year and assuming that the person has retired and will be in a lower tax bracket, this can still be attractive..for the following reasons

    1. In India very few people commit to paying regularly if not for tax saving OR insurance. Atleast the committment is there.
    2. A 20 pct or 30 pct saving now, that part has better time value of money and can be conciously re-invested, if done properly.



    • Dear Shiva,
      20 pct that is taxable can be withdrawn in tranches over 10 years – may be true.
      But don’t you believe that this product is too complex for the masses to understand. We need to keep looking at THE RULE BOOK to see when we can withdraw, how much we can withdraw, how much is taxed etc.,
      Kindly share your views.

  • vikas gaotankar says:

    sir my earning is between 450000 to 500000 per annum
    i want to go for mutual fund , please suggest as i do not have any knowledge about it

  • Jay says:

    Very clearly explained.

    Agree with main thrust of the article that MFs beat NPS in most cases.

    Would like to point out certain cases, where NPS could be preferred to MFs.
    NPS Tier 1: if the total corpus is below 2 lakhs at time of retirement, the whole corpus can be accessed. This could be used by someone very close to retirement, say 3 years away from retirement to obtain decent returns at very low expense, get indexation benefits, and save tax at time of investment.
    NPS Tier 2: no restrictions on withdrawal, indexation benefits, but no other tax benefits. Persons who are seeking exposure to debt funds can choose Tier 2 for their low expense.

    • Dear Jay,
      Decent returns ? Again this depends on type of fund & market conditions. Very near to retirement then majority of the investors can’t afford to take risk.
      But again, as pointed out by you, we (you & me) are trying to put across the Pros & Cons of this investment option.
      For majority of the investors, this many not be a great investment avenue.
      One should take a prudent investment decision based on the positives and negatives and also as per his/her requirements.

      • Jay says:

        My grouse with MFs in India are their expense ratios. The direct plans have helped,
        Decent is of course relative. Absolutely, requirements vary from person to person.

  • Rose says:

    Dear srikant ,
    I am fan of your blog and it is pleasure to read.It provides a lot of knowledge regarding financial market.
    Please publish about tier 2 of NPS .Is it a good investment?

    • Dear Rose,
      This is a voluntary savings account from which subscribers are free to withdraw their savings whenever he/she wishes. It is like a Savings Bank account. The facility of Tier II account was made available from December 01, 2009 to All Citizens of India including Govt. employees and Corporate sector. It is mandatory to have an active Tier I account for opening of a Tier II account.
      There are no tax benefits on tier-2 contributions.
      Also, only 50% can be invested in an equity fund.
      So, equity mutual funds can be a better option for long term or retirement planning.

  • Rupali R. Mithbaokar says:


    What are the investment avenues available for 65 years old senior citizen having Rs. 70 Lakhs to invest and requiring regular flow of cash?

    Because, FD rates have gone down and he will have to bear TDS. In such case his actual tax liability would be much less than TDS deducted.

    Any options apart from FD for a conservative senior citizen who is averse to stock market / Mutual fund?


  • TV.siva says:


    Hi , I am LIC agent, I joined nps 2 back,

    Its called swavalamban ,

    Sir, swavalamban pension is in which tier.
    Do I hv option to switch to ultra safe tier. ? Where 60% govt. Bond and 40% in corporate bond

    • Dear Siva,
      NPS – Swavalamban invests only up to 15% of the total funds in the equity or stock markets. The balance funds are invested into fixed income instruments such as corporate bonds and Government securities.
      This scheme is also know as NPS Lite and Tier structure is not there.

  • skmohapatra says:

    I am a great fan of you as a financial adviser. I want to do a NPS for 50,000/- per year to save tax since i am in 30% range tax slab. My age is 49 and i am doing service in a Private sector company.

    By not doing NPS I am losing around Rs.16000/- per annum after covering full 80C in PPF/PF etc.

    Pl. guide me if I will adopt the NPS from any Bank through on line which is the best Bank for this & I want to adopt Scheme -II NPS so that my money 60% can be invested in Share market by the Banker to get more return.

    Pl. suggest the best ways as per your experience.


  • Tarun says:

    Sreekanth, you have provided very good insight on NPS. I understand the biggest drawbacks are tax on 60% corpus and low annuity rate of pension schemes. But for a salaried employee working in corporate sector where it’s not mandatory to enrol. I still thought of NPS as a good option to save taxes. It can save me around 15450 INR per annum while I make 50k investment every year. Also my company provides option to get deduction of 10% of basic salary into NPS account, this may give more tax benefit every year.
    Since the 80C limit is still 1.5 lacs (too low), we are not left with many options to save taxes. your views please?

    • Dear Tarun,
      Not all investment decisions can be based just on TAX SAVING purpose!
      There can be a case where the returns generated by an equity oriented fund outscore the tax savings of NPS + also considering the fact that annuity rates are low + taxation of entire corpus (not just gains) on withdrawal (if any).

      • Tarun says:

        Thanks for the insight Sreekanth. Seems absolutely logical, though one can still decide based on tax bracket he/she is in. For a person in 10% bracket, it seems completely illogical but for a person in 30% bracket it’s little tricky. Again individual choice. 🙂 Thanks again !

  • BP says:

    Hi Reddy,

    For Financial year 2013-14 my status was NRI and my only income was bank interest and bank have already deducted TDS on it. I got a letter from income tax department to response under compliance for not filling of ITR for that financial year.

    So, after login to there are following 2 tabs under compliance.
    1# One “Filling of Income Tax Return” tab i will select option “Others” and will mention my comments.
    2# But in second tab “Related Information Summary” there are couple of option under “Information Relates To” for Information Code TDS-194A.

    Q1: I am wondering which option i should select under “Information Relates To” ?
    Q2: Additionally, on google i found that code “TDS-194A” is applicable only to resident and not for NRI ?

    Please suggest me on the above 2 points i really appreciate for your help.

  • Anand patel says:

    Hi I am a great fan of you. You are sharing good financial knowledge in a simple language.

    I am a govt. employee.
    As u said NPS is compulsory, then it has to be done. But if it is optional, n employer (govt) contributes the same amount as mine amount (e.g. 5000 from me n 5000 from govt) then how is this option.
    Should I opt for it or should I go for equity mutual fund??

    • Dear Anand,
      If your employer is contributing then it becomes ‘compulsory’ scheme, am I right?
      As of now, voluntary contributions into NPS can be avoided.
      Thank you for your appreciation!

  • Debendra says:

    Sir, I have two questions:
    1> If I invest my earning in my wife’s(House wife) name who has to pay the tax on pension amount? I am asking this, because, mostly her income would fall under non taxable bracket. In that way pension amount would be tax free in her hand if pension is her income.
    2> If I invest 50K in her name, can I show that amount under 80CCD(1b) to avail tax benefit?


  • sontu maitra says:

    dear sir,I resign from a privet sector since two month.and I have not completed age 35years.can I withdrown total amount? Thank you sir.

  • Rajesh says:

    hi srikanth ,

    I am looking for ElSS to start my investements for tax saving but i am bit confused which Elss i should i opt .
    Actually i have done some research also , in that i got UTI is new but capturing market in well maner though.
    Can you please suggest me ??
    My prefferable options are:- AXIS and UTI long term.


  • Suresh KP says:

    Sreekanth, I have different opinion about NPS. Couple of years back, it gave returns upto 14% too. There are various top funds which one can invest in NPS.

    • Dear Suresh ..but at what cost? Don’t you believe that there are better alternatives which are less complex, more flexible and also tax efficient than NPS option?
      Kindly share your views.

  • B.Subramanian says:

    Hi Sreekanth,

    You gone through a good insight of National Pension Scheme (NPS) as part of the personal saving schemes.

    I believe there is no alternative Saving schemes available in India without any type of taxes.

    If we opt for PPF, MIS, etc., its true that it is safe heavens, but it has some investment limitations. So, These were considered for starting any new savings. However, these are not useful instrument if we wish to accumulate a pension fund.

    I believe, as far now, the alternative given for NPS is not sufficient enough to accumulate the pension fund for any individual . NPS may be a successful one, if it beats the inflation and get some tax cushions in a long run. The alternative suggested are already discussed in many forums.

    Thank you.


    • Dear Subramanian,
      Without any type of taxes?
      How about ELSS mutual fund / PPF / EPF which fall under E-E-E tax category?
      NPS can be a good option if tax on maturity corpus is removed and buying annuity product is made optional.

  • sakshi says:

    How are mutual funds taxed ?

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