Should you invest in National Pension Scheme?
Simhadri Rama Rao Kavali
Talent & Organizational Development Leader@Walmart Global Tech | Ex-AWS & Cisco | Certified Facilitator & Team Coach | Project Management Professional | Personal Finance Coach
I had asked this question to myself many times and after doing lot of research I was convinced that I should not be investing in it. Please do remember this is not an advise or a recommendation to invest or not to invest.
One of the most compelling reasons everyone gives in favor of NPS is tax savings. One will get two types of tax savings - 50K for tier-1 and if you are employed and opt for 80 CCD(2) you will get an additional tax benefit up to 10% of your salary (that is invested in the NPS scheme). All this sounds great!! This is only one side of the story. Now, let us look at the other side!!
There are certain limitations with NPS.
While NPS was well intended for those that depend on pension post retirement, there are better avenues for investment that will outweigh the benefits (and limitations) offered by this scheme. Look beyond tax savings before choosing to invest in this scheme.
Scribe
9 个月@Simhadri, good common-sense thinking.
Senior Technical Manager at HCL Technologies
9 个月Simhadri, Thanks for the nice article; I too analyzed a lot about NPS and finally decided to proceed with NPS for below reasons: 1. We will think we can redirect 50K to SIPs and get more returns but this we can't accumulate for a longer period due to other financial needs. One or other day we will collapse SIPs when in need. 2. NPS is locked, and you can't touch it. It's a retirement benefit. 3. Imp one - We are thinking 40% is going to an annuity but we already saving 30% thru tax. Effectively 10% only is going to annuity from our pocket (40% - 30% tax benefit) 4. My NPS XIRR is 9.9% and it's good compared to EPF, PPF, FD, RD, Inflation, Liquid Funds Everyone one has their own perception. End of the day, they should take a call.
Global Partner Account Manager at Cisco
9 个月Agree. I believe every financial instrument has its unique USP and should not be mixed like Tax and fixed income like pension, or ULIP insurance with equity.