Lets say you want to invest 50K in your NPS. Because you get tax benefit of 30%, you get a tax advantage of 15K so lets add that back.
So if you do 65K per year from 21 to 60 at 8% this value will become 1.55cr (NPS allows a maximum of 75% allocation to Equity + this allocation keeps reduce from the age 50 onwards & hence on their own website they show calculations only at 8%)
Plus you can only remove 60% of this 1.55 cr as lumpsum, you will compulsorily have to buy an annuity from a insurance company for the remaining 40% which is not a great idea as currently the insurance company gives ~6% interest on annuity where as I can invest the same amount in a senior citizen savings scheme which pays 8.2%
Vs this if you do 50K in Equity MF because it does not get any tax advantage. At 12% this value will become 3.42 cr. Even after paying 12.5% LTCG on this, the value is 3.02cr which is high than the NPS by 1.47 cr + There is no compulsion to buy an annuity & the money is liquid
If your NPS makes more return than 8% please understand that the MF will also make much more than 12%
The biggest advantage of NPS for me is the lockin bringing in the discipline which most investors won’t have.
