Best NPS funds 2024: How to choose pension funds that have given best returns to boost retirement savings
While the tax benefits on these investments have shrunk in the past few years, things have been very different for the National Pension System (NPS). Tax benefits for the NPS have progressively increased in the past 10 years, each change making the pension scheme more advantageous for the investor. This year’s Budget has enhanced the tax deduction for those opting for the new tax regime. Under Section 80CCD(2), up to 10% of the basic pay put in the NPS is tax-free. This has been increased to 14% of the basic pay under the new tax regime.
This makes the NPS a compelling investment. A person with a basic salary of Rs.1 lakh a month can potentially save Rs.52,000 in tax by opting for the NPS benefit. High income earners with large investible surpluses will find it especially beneficial. Some corporates are going the extra mile to encourage their employees to sign up for the pension scheme. “A leading MNC offered to contribute Rs.1,000 for six months for every employee who chose to open an NPS account. It’s like a Swavalamban scheme for corporate employees,” says Sriram Iyer, CEO of HDFC Pension.
Magic of compounding
If given enough time to grow, investment in the NPS can transform the life of investors. “We see a lot of people with very large Provident Fund corpuses of Rs.2-3 crore. If 8.5% return could build such a huge corpus over 25-30 years, imagine what the 10-10.5% return from the NPS could do,” says Iyer.
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