NPS vs EPF: Nationwide Pension Scheme (NPS) and Worker Pension Fund (EPS) are two pension schemes which are thought-about good retirement choices. EPF comes underneath the Exempt-Exempt-Exempt (E-E-E) class, the place one’s deposits, curiosity earned and the maturity quantity is tax free. One can make investments as much as 12 per cent of their fundamental wage in EPF. Their employer additionally contributes the identical share of quantity to the EPF account. Nevertheless, 8.25 per cent of the employer’s contribution goes to the EPS account whereas 3.67 per cent goes to the EPF account. The minimal contribution in an EPF account is Rs 1,800 every from the worker in addition to employer’s facet. The present rate of interest for EPF is 8.25 per cent. The scheme additionally supplies the compounding on curiosity.
The contributions to EPF additionally goes within the worker’s Worker Pension Fund, which makes them eligible to get the month-to-month revenue put up retirement.
Two main elements that make the EPF scheme interested in so much accountholders is that it supplies assured return and tax exemption.
What’s NPS?
NPS, however, is a market-linked scheme, the place the accountholder can select schemes as per their danger publicity.
The scheme that was began for central authorities workers, was later prolonged to non-public sector workers as nicely.
The scheme is accessible for Indians residing within the nation and overseas. Folks between the age of 18 and 70 years are eligible to spend money on the scheme.
On the age of 60, one can withdraw their corpus as much as a most restrict of 60 per cent, the remainder of the quantity is invested in annuities.
The return on these annuities supplies a month-to-month pension.
Each NPS and EPF are well-liked choices amongst buyers looking for retirement corpus. Right here, we present you how one can create a corpus of Rs 4 crore by means of NPS and EPF.
Methods to get Rs 3.25 crore corpus by means of EPF
To recover from Rs 3 crore corpus by means of EPF, you have to begin contributing to EPF at 25 years of age.
Right here, we’re assuming, you fundamental wage is Rs 50,000 and also you anticipate a wage increment of 5 per cent in your fundamental wage.
Additionally, you will utilise the utmost restrict of EPF contribution at 12 per cent, and your employer would contribute 3.67 per cent to your EPF account each month.
For those who proceed it until your retirement age of 60, your whole contributions until that age will likely be Rs 84.92 lakh and your whole corpus at that age will likely be Rs 3.25 crore.
Particulars | Whole Quantity | Wage Tax Legal responsibility (OTR) |
(Begins at age 25) | Rs 65,000 | |
Primary Wage | Rs 50,000 | Rs 1,63,800 |
Worker PF Contribution 12% | Rs 6,000 | Rs 3,51,000 |
Employer PF Share 3.67% # | Rs 1,835 |
Chart Courtesy: Finnovate
Methods to get Rs 3.25 crore corpus by means of NPS
Since NPS is a market-linked scheme, we’ll assume just a few issues earlier than we begin.
You’re going to get a ten per cent annual returns in your NPS contributions.
You’ll begin contributing Rs 8,500 each month beginning at 25 and until the age of 60.
On the retirement, your whole contribution will likely be Rs 35,70,000, and your corpus is estimated to be Rs 3,25,40,352 (over Rs 3.25 crore).
Nevertheless, you have to bear in mind you could withdraw a most of 60 per cent of that corpus.
Even when you withdraw 60 per cent corpus, make investments the remainder of the cash in annuities and get a six per cent return on that, you will get a month-to-month pension of Rs 65,081.