Understanding NPS: What Are Its Benefits and How Does It Compare to PF?

Benefits of NPS

I request your valuable inputs on:

1. Benefits of NPS

Difference Between NPS and PF

2. Difference between NPS and PF

Suggestions on NPS

3. Suggestions required on whether we should proceed with NPS

Thank you.

NPS is voluntary. 10% of basic + DA is tax-exempted, in addition to the Sec 80C limit. Returns are not guaranteed and are based on your fund performance. Can't be withdrawn in between for Tier I account.

PF, on the other hand, is mandatory and has guaranteed returns. It can be withdrawn for specific purposes. Tax benefits are available under Sec 80C.

Regards.

Thank you, Pon, for the insights you provided. I really appreciate it. However, I am seeking more in-depth details, including the advantages and disadvantages, and further differences between PF and NPS.

Regards,
Ashish

Advantages of NPS

The main advantage of NPS is the portability and transparency in the system. The NPS account is portable across the country. The PRAN number, once allotted, remains valid throughout your life. The entire contribution and other details can be seen by logging in.

NPS vs. EPS

NPS is a defined contribution scheme, while EPS is a defined benefit scheme. The additional tax benefit under section 80 CCD is applicable only if NPS is routed through a corporate, not otherwise. If you are a personal contributor to NPS, it is covered under section 80C only.

Encouraging NPS at the Corporate Level

For people looking for a hassle-free pension, NPS is a beautiful product and must be encouraged at the corporate level as well. Putting money early in one's life in NPS will give much better returns than EPS. In my previous stint at Hyundai Engg, we had offered this additional benefit to our employees.

For more details, you may see the PFRDA website.
Regards.