InvestorQ : Is NPS investment similar to retirement products like EPF and PPF?
sara Kunju made post

Is NPS investment similar to retirement products like EPF and PPF?

Answer
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Moii Chavate answered.
1 year ago


Union Cabinet has exempted the 60% of the corpus in December 2018. An individual should use the 40% of the corpus to buy an annuity and can withdraw 60%. However, prior to this 20% of the withdrawal was taxed. As the cabinet has exempted tax for the 60% of the NPS corpus, NPS has become 100% tax-free. So the comparison of NPS with EPF and PPF has begun. Although now NPS has become a popular investment option, the difference between NPS and retirement products like EPF and PPF still exist.
NPS is similar to EPF and PPF in many ways yet it has its own unique feature, some of them are as below:
  • As 40% of the corpus amount is used to buy an annuity plan the disposable amount at retirement is less.
  • The annuity income from your 40% is taxed at your slab rate thus making it a bit less attractive investment option.
  • Although one can withdraw the 60% of the accumulated corpus at the time retirement, the rules allow the investor to withdraw money in 10 annual investments. This means that the money will be received until the investor attains the age of 70 years.
Even though NPS has become 100% tax-free, considering the above things one should limit their investment only up to a certain limit that offers a tax deduction, that is Rs. 50,000.