In this post we are going to discuss about NPS Scheme NPS contribution NPS deduction
NPS returns NPS investment How to generate NPS account balance, statement everything.
First of all let us evaluate the Pros and Cons of NPS, Now a days there is movement against NPS in each and every government sector.
Belwo are the five Cons or we can say negative points because of that people have started worrying about their PF, Pension, as returns of NPS is directly based on the performance of market, i.e. Stock Market.
Why NPS Should be abolished and OLD pension Scheme should come in existence.
a) Long lock in - ELSS funds allow tax savings under section 80C of personal taxation (although LTCG tax of 10% above Rs 1 lakh is now applicable) and also have a shorter lock-in of 3 years. For a young investor investing into ELSS, 60% of the money can only be withdrawn once the age of 60 is attained. For a 30 year old, this means a wait of 30 years for liquidity.
b) Passive Fund Management: Low cost is due to the fact that money is passively invested. Investors can replicate the strategy with ETFs as well. There is no option for active fund management available.
c) Portfolio Allocation is not flexible: Investors desiring putting all money into equity cannot decide to do so under NPS. There are various allocation mixes available but overall they offer much less flexibility on asset classes versus mutual funds.
d) No tax benefit on 40% of the money: 40% of the money at retirement is invested compulsorily into annuity products and the pension generated from these annuities is taxable.
e) Low Returns on Annuity: Annuity products generally provide low returns versus other options like debt mutual funds. Since it is compulsory to invest into these annuities, it is something that NPS investors just can’t get out of.
a)Tax Benefit: 1.5 lakh under 80C, additional 50k under section 80CCD. There is further benefit under section 80 CCD2 if the employer contributes into NPS on employee’s behalf - but this is seldom done.
b) Low Cost: Fund management charge is just 0.1% - this ensures that cost will never hamper the returns.
c) Investor Education Threshold is low: The investor can allocate money to NPS without having to educate himself on the technicalities of portfolio allocations, stock investing etc. It therefore caters to a large number of retail customers
d) 60% Withdrawal is tax free: 60% of all money invested into NPS can be withdrawn at the time of retirement completely tax free. Hence, you not only save tax in investing into NPS at the time of investment, but don’t get taxed at withdrawal as well.
i request readers to put their comments regarding NPS in below comment section.
NPS returns NPS investment How to generate NPS account balance, statement everything.
First of all let us evaluate the Pros and Cons of NPS, Now a days there is movement against NPS in each and every government sector.
Belwo are the five Cons or we can say negative points because of that people have started worrying about their PF, Pension, as returns of NPS is directly based on the performance of market, i.e. Stock Market.
Why NPS Should be abolished and OLD pension Scheme should come in existence.
a) Long lock in - ELSS funds allow tax savings under section 80C of personal taxation (although LTCG tax of 10% above Rs 1 lakh is now applicable) and also have a shorter lock-in of 3 years. For a young investor investing into ELSS, 60% of the money can only be withdrawn once the age of 60 is attained. For a 30 year old, this means a wait of 30 years for liquidity.
b) Passive Fund Management: Low cost is due to the fact that money is passively invested. Investors can replicate the strategy with ETFs as well. There is no option for active fund management available.
c) Portfolio Allocation is not flexible: Investors desiring putting all money into equity cannot decide to do so under NPS. There are various allocation mixes available but overall they offer much less flexibility on asset classes versus mutual funds.
d) No tax benefit on 40% of the money: 40% of the money at retirement is invested compulsorily into annuity products and the pension generated from these annuities is taxable.
e) Low Returns on Annuity: Annuity products generally provide low returns versus other options like debt mutual funds. Since it is compulsory to invest into these annuities, it is something that NPS investors just can’t get out of.
But, But there is some Pros, i mean Positive points of NPS also along with above mentioned negative points.
a)Tax Benefit: 1.5 lakh under 80C, additional 50k under section 80CCD. There is further benefit under section 80 CCD2 if the employer contributes into NPS on employee’s behalf - but this is seldom done.
b) Low Cost: Fund management charge is just 0.1% - this ensures that cost will never hamper the returns.
c) Investor Education Threshold is low: The investor can allocate money to NPS without having to educate himself on the technicalities of portfolio allocations, stock investing etc. It therefore caters to a large number of retail customers
d) 60% Withdrawal is tax free: 60% of all money invested into NPS can be withdrawn at the time of retirement completely tax free. Hence, you not only save tax in investing into NPS at the time of investment, but don’t get taxed at withdrawal as well.
i request readers to put their comments regarding NPS in below comment section.