Creative: I want to save taxes on Rs. 50,000. Should I invest in NPS or equity MFs?
Answer: NPS is one of the better products available in market in order to plan for your Golden Years. It is usually compared with provident fund. Employees’ Provident Fund (EPF) and Public Provident Fund are considered to be debt-oriented products with fixed returns. As compared to them NPS gives higher returns over the long term due to the provision of allocating 50% to equity in its portfolio. NPS is taken superior to many insurance-linked retirement products too being less expensive and by investment product in nature.
NPS, in comparison to Mutual Funds-oriented retirement solutions has its own merits. The long-term lock-in that NPS has protects an investor from premature withdrawals and the fixed nature of its index-based equity exposure rescues him from selecting between various funds and maintaining a portfolio through the years. Thus, it becomes beneficial for an investor who wants a low-cost, low-maintenance and pure investment retirement product. Mutual Funds offer high returns for disciplined investors and for those who can, either by themselves or with the help of an adviser, manage a retirement portfolio.
Answer: NPS is one of the better products available in market in order to plan for your Golden Years. It is usually compared with provident fund. Employees’ Provident Fund (EPF) and Public Provident Fund are considered to be debt-oriented products with fixed returns. As compared to them NPS gives higher returns over the long term due to the provision of allocating 50% to equity in its portfolio. NPS is taken superior to many insurance-linked retirement products too being less expensive and by investment product in nature.
NPS, in comparison to Mutual Funds-oriented retirement solutions has its own merits. The long-term lock-in that NPS has protects an investor from premature withdrawals and the fixed nature of its index-based equity exposure rescues him from selecting between various funds and maintaining a portfolio through the years. Thus, it becomes beneficial for an investor who wants a low-cost, low-maintenance and pure investment retirement product. Mutual Funds offer high returns for disciplined investors and for those who can, either by themselves or with the help of an adviser, manage a retirement portfolio.
However, investing in NPS or such instruments purely for tax deductions will do no good. The right approach is to first analyse if NPS fulfills your retirement needs or not and if so, use tax incentive as a fillip.
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