Best SIP Funds to Invest Online
Returns: 9.5% (Past three years)
The NPS can help save tax under three different sections. Firstly, contributions of up to Rs 1.5 lakh can be claimed as a deduction under the overall Sec 80C. Secondly, there is an additional deduction of up to Rs 50,000 under Sec 80CCD(1b). Thirdly, if the employer puts up to 10% of the basic salary of the individual in the NPS, that amount will not be taxable.
The trinity of tax benefits has attracted a lot of investors to the pension scheme. However, many are still put off by the fact that NPS is not completely tax free. Only 40% of the corpus is tax free on maturity. Also, on maturity, the NPS forces the investor to put 40% of the corpus in an annuity to earn a monthly pension. This pension is treated as income and is fully taxable.
For young investors, the long lock-in period is also a deal breaker. NPS investments cannot be withdrawn before retirement, except in some exceptional circumstances and for specific needs. However, experts say the long lock-in period is a blessing in disguise. When the purpose is to save for old age, it is necessary to discourage early withdrawals
The twin rallies in equities and bonds have helped the NPS churn out good returns in the past few years. Aggressive investors who put the maximum 50% in equity funds have earned the highest returns. But this performance may not sustain in the coming months. NPS funds have lined their portfolios with long-term bonds which have not given good returns in recent months. And equity markets are looking overvalued. Even so, investors can expect better returns from NPS than pure debt products.
Smart tip: Don't be too conservative when investing for the long term. A balanced exposure to all categories works best.
SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich
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