Investment plan
Most Indian people decide to save for retirement at the last moment, the tax season comes. But the reality is that if you start planning early, then it is easy and more beneficial to add money for retirement. There are three most trusted government schemes for retirement saving in India. National Pension System (NPS), Public Provident Fund (PPF) and Employee Provident Fund (EPF). These three schemes provide tax exemption and government security, but their merits and shortcomings are different in terms of returns, flexibility and liquidity.
EPF: Automatic Savings Scheme for Salary with Salary
If you work in a company, then EPF (Employees Provident Fund) cuts a part of your salary automatically and goes into it. Your company also deposits the same amount in your account. The government fixes the interest rate on this every year. Currently it is 8.25%. The biggest advantage of EPF is that you do not have to work separately to save. At the time of retirement, you can remove it, or do partial withdrawal in special circumstances like buying a house, medical emergency or marriage. For people with salary, this scheme is considered the most trusted basis of retirement funds.
PPF: Safe and Tax-Free Investment
If you are self-employed or want to increase your EPF savings further, then PPF (Public Provident Fund) is a great option. It has a 15-year lock-in period, which may look long, but gives good returns in a long time. Currently, its interest rate is 7.1% and both interest and maturity amounts available in it are tax-free. From the seventh year, you can also do partial withdrawal, which also keeps some flexibility. Due to government guarantee and fixed interest rate, PPF is considered an necessary scheme for safe investors.
NPS: Better Return Option Related to Market
The NPS (National Pension System) is different from both other schemes, as it is a market-link scheme. In this, your money is invested in equity, corporate bonds and government securities. Return is not certain in this, but it can usually get 8% to 12%. After retirement, you can withdraw 60% tax-free of your total fund, while the remaining amount has to buy an annuity (pension), which gives regular income every month. That is, there is a possibility of more returns, but there is also a market risk.
Which is better?
If you want safe and stable returns, EPF and PPF are better for you. At the same time, if you want to get more profits in the long term by taking a little risk, then NPS is a perfect option. EPF can be the base for salary, while investing by mixing PPF and NPS can make your retirement funds stronger.