• Hey there! Welcome to TFC! View fewer ads on the website just by signing up on TF Community.

Does NPS make Sense if You have switched to New Tax Regime?

Apply For Lifetime Free IDFC First Credit Card
sanarora

sanarora

TF Buzz
VIP Lounge
I wanted opinion if I should continue NPS investments , I had started when I was using old Tax regimen, I am a working professional & file under 44ADA, Now my query is does it makes sense to Continue 50K / year into NPS when upfront I don't get any benefit ( 80CCD(1B) not applicable for me ) under new tax regimen, and with ever changing rule of govt the way LTCG tax shot up 25% in one single budget( from 10 to 12.5%) , who is to say the EEE benefit of my NPS investments will stay same as it is today after 30-40 years when its time for me to redeem it, isn't it better to not lock up my money & just invest in mutual funds instead then..?
experts plz suggest.
if no then should I probably just invest 1000-5000/year to keep my nps active.
 
Apply For LTF AU LIT Credit Card
New tax regime only gives NPS benefit with employer contribution, I mean when it gets deducted from your salary. Self contribution only makes sense for about 50000 as that's above the 150k deduction which is easily met.
 
50k above 150k is for deductions in old tax regimen in New tax regimen there are no deductions , also I don't have an employer I freelance so no salary only professional consultation charges I get. Therefore no employer contribution option.
 
NPS is effectively 3 mutual funds combined into 1, equity+corporate debt+govt debt. And one can switch between the 3 upto 4 times a year. Every time the investment ratio is changed, the entire portfolio is reshaped in new ratio. Switch cost is only Rs.25 and there is no capital gains tax for such switch. So it is possible to earn short term profits on the equity portfolio and shift the gains to debt portfolio without any tax and then again switch back to equity when markets are down/expected to pick up.
Also, NPS funds have lowest expense ratios among all MF.
 
I think u shud stick to old tax regime till its working. U can invest 1.5l plus 50k nps. Eventually every1 will b transferred to new tax den i can't see any benefit of nps above mf. Nps just little bit less risky.
 
NPS benefits are low expense ratio + low taxation. In future govt might increase LTCG only then NPS will become more attractive. NPS might not beat active MF.
 
Having dealt with EPFO I would be very wary of NPS even with the tax benefit. I'd rather stick to MFs.

However if someone gets employee contribution tax benefits on those additional ~7L then possibly and that is "possibly" explore NPS as a debt heavy investment vehicle.

I'd still be very wary of this! It's "entangled with the Govt heavily" (!!!) and has very complex setup when you are supposed to start utilising it.
 
Vinay13 said:
EPFO is corrupt. NPS has options to withdraw online
Click to expand...
EPFO didn't become corrupt in a day. So with the NPS' horizon it has plenty of time. Besides one might not want to lock money for decades and in the end it turns out Govt just made it really bad. It will be a complete lock. Also, NPS is not at all EEE.

By the way, EPFO also has "an option" to withdraw online 😀
 
With NPS you can withdraw only 60% of your corpus at retirement, after that the remaining 40% will be paid at annuity until death and nominee gets to keep the funds. And who know what new rules will come up in the next 5/10 years.
 
sanarora said:
I wanted opinion if I should continue NPS investments , I had started when I was using old Tax regimen, I am a working professional & file under 44ADA, Now my query is does it makes sense to Continue 50K / year into NPS when upfront I don't get any benefit ( 80CCD(1B) not applicable for me ) under new tax regimen, and with ever changing rule of govt the way LTCG tax shot up 25% in one single budget( from 10 to 12.5%) , who is to say the EEE benefit of my NPS investments will stay same as it is today after 30-40 years when its time for me to redeem it, isn't it better to not lock up my money & just invest in mutual funds instead then..?
experts plz suggest.
if no then should I probably just invest 1000-5000/year to keep my nps active.
Click to expand...
NPS (T1) never made any sense for any tax regime.
Biggest drawback....
Not being EEE - Essentially you're just delaying paying tax NOW to LATER. Also later it'll be taxed on principle as well as interest part. Meaning instead of paying X tax now, you'll end up paying 2X/3X or probably more later.
 
nixflix said:
EPFO didn't become corrupt in a day. So with the NPS' horizon it has plenty of time. Besides one might not want to lock money for decades and in the end it turns out Govt just made it really bad. It will be a complete lock. Also, NPS is not at all EEE.

By the way, EPFO also has "an option" to withdraw online 😀
Click to expand...
It's near impossible to withdraw and all requests are rejected citing silly reason. I tried to withdraw and my application rejected saying that bank passbook copy not attached. I actually attached cheque leaf copy as given in the application. Inspite of this, they wanted passbook copy now. The reason for another rejection was that I got too many increment in a year. Do not put too much money in epfo as the system is totally against withdrawing the money .
 
KGSIPO said:
It's near impossible to withdraw and all requests are rejected citing silly reason. I tried to withdraw and my application rejected saying that bank passbook copy not attached. I actually attached cheque leaf copy as given in the application. Inspite of this, they wanted passbook copy now. The reason for another rejection was that I got too many increment in a year. Do not put too much money in epfo as the system is totally against withdrawing the money .
Click to expand...
File a complaint and track it for some time. Pretty sure they won't do anything. Then file a complaint here https://pgportal.gov.in/
 
You must log in or register to reply here.

Similar threads

N
Can I Choose the Old Tax Regime While Filing ITR for the First Time in AY 2025-26?
Replies
3
Views
140
NABNAB is verified member.
NAB
Back
Top