Home Financial Planning EPF or NPS Best Retirement Saving Option?

EPF or NPS Best Retirement Saving Option?

by Sk Salman

What is the best retirement saving option for you EPF or NPS?

EPF or NPS are both retirement-situated speculations with expense sparing advantages. In any case, which of the two will enable you to set aside more cash for your future? The Employee Provident Fund (EPF) and the National Pension System (NPS) are both retirement-arranged speculations with expense sparing advantages. How about we investigate how these plans work and how they advantage the financial specialist.

How would they work?

EPF, taking into consideration certain terms and conditions, anticipates that the qualified representatives should make a month to month commitment to the plan and the business to coordinate it. On retirement, the representative gets a single amount sum, containing both the all out head and the collected intrigue. The commitments made by the worker are charge deductible under Section 80C of the Income Tax Act, and the premium earned on the reserve is completely absolved from expense also.

NPS is an administration activity to stretch out annuity advantages to every single Indian native. It is compulsory for Central-government workers and the representatives of some state governments to put resources into the NPS. It’s where one can normally add to an annuity account throughout one’s working life. When resigned, the speculator can pull back a part of the corpus as a single amount and can purchase an annuity with the rest of, guarantee a consistent pay during retirement. The NPS is viably tax-exempt.

What are the highlights?

The EPF offers protection and annuity advantages to the endorser. In the hour of need, for example, medicinal crises, monetary crunch or any surprising costs, untimely withdrawal of the EPF is allowed. The withdrawals at development or following 5 years are altogether excluded from duty. The EPF is predominantly an obligation situated item and at present wins a loan cost of 8.65% p.a. With simple online access, the speculator can see the record parity utilizing the EPF number.

NPS gives the alternative to a financial specialist to expand the portfolio between Equity, Government Securities and Fixed Income instruments. A speculator can put up to 75% in value reserves. Value speculations are an extraordinary preferred position that the NPS offer. While value speculations can be unstable, over the long skylines of an average NPS venture, they are probably going to produce a lot higher returns than fixed income protections (Like PPF/EPF).


There are two Types of NPS accounts:

Tier I: Pension Account with Tax Benefits

The duty finding on speculations under this plan is up to Rs 1.5 lakh (under Section 80CCD) and Rs 50,000 (under Section 80CCD (1B)) can be benefited for self-commitment in a solitary money related year. It is recommended that from the FY2019-2020 onwards, at the season of retirement, 60% of the worth can be pulled back with no assessment suggestion and the staying 40% is compulsorily changed over to an annuity. The annuity corpus, despite the fact that bolted, is tax-exempt. The pay got from the annuity, in any case, is assessable as normal salary.

Tier II: A Savings Account with no Tax Benefits

From FY 2019-20, it is recommended that Tier II records will appreciate tax reductions up to Rs 1.5 lakh, under Section 80C, yet with a lock-in time of 3 years, similar to an Equity Linked Saving Scheme (ELSS) Fund.

Which speculation technique is best for you?

Like all speculation choices, this also ought to be made relying on the speculators’ money related objectives, hazard, and time skyline. The NPS is reasonable for traditionalist financial specialists, who are attempting to fabricate their retirement corpus at least hazard level. In the event that you have the advantage of time and aren’t totally hazard unwilling, you may consider putting resources into ELSS common assets to spare expense. Speculators who have a bigger hazard craving may be in an ideal situation putting resources into ELSS for tax reductions and construct their retirement corpus with a blend of open-finished value and obligation common assets.

Financial specialists would spare a similar assessment in the two alternatives, yet the ELSS and NPS mix can possibly acquire higher returns and along these lines fabricate more riches over the long haul. Assess your alternatives with a money related counsel and settle on the decision that accommodates your life objectives.

(By Amar Pandit, CFA, and Founder, Happyness Factory)

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