NPS the cheaper and Tax Friendly Alternative:
|NPS||Insurance Plans (ULIP Based)||Mutual Fund Pension Plan|
|Investment amount per year||100000||100000||100000|
|Charges per Year (Initial Period)||925||13200||1250|
|Charges per year (5 Years to 10 years)||388||6000||1250|
|Charges per year (11 years to 15 years)||455||3000||1250|
|charges per year (16 years)||455||0||1250|
|Fund Management||0.0009 %||1.25 %||1.25 %|
|Age limit for annuity||60||Flexible||58|
|Assume CAGR||10 %||10%||10%|
|Maturity proceeds after 30 years||1.8 Crores||1.3 Crores||1.39 Crores|
|Lump sum (Max)||60 %||33%||0-100%|
|Pension Corpus (Min)||40%||67%||0-100%|
guided by tax concerns. There is always a rush to invest in order to save on tax. ULIPs had an advantage over the NPS and mutual funds because it was taxed as EEE. This means that the withdrawal and is tax free too. Surely this is a major plus, but with the provisions in the new Direct Tax Code, the NPS will also be taxed in the EEE framework. This will invert the tax situation among retirement products with investment benefits.
As a result, its major handicap will now be removed. The government has designed the NPS to benefit the investor to the maximum and the new taxation vis-a-vis the NPS will only add to the attractiveness of NPS.
it is a very effective tool that covers capital protection and also provides growth. With its lowest charges, it also is the cheapest way to get an exposure to the market. For the thousands and lakhs of employees in
the unorganized sector who have negligible or no post-retirement social security benefits, NPS is a boon.