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A couple of queries that I tried to resolve myself, but the info on net has been sketchy:
a) Is the tax-free contibution under super annuation still limited to 1.5L/annum or is it now submerged into the overall kitty of 7.5L per annum? For ex: can I have tax-free SA contribution of 2.5L as long as my overall kitty doesn't exceed 7.5L?
b) Is it worth moving my SA fund to NPS? How?
(I can take agressive/risky option in NPS for another 7..8 years, my current SA fetches areound 8% interest only).

You are placing too much trust in the govt. But that is a separate discussion. AMCs are also regulated by the govt for that matter.

Likewise, I also never implied investing only in MFs. My argument was for MFs instead of NPS, all other investments notwithstanding.

Won't PPF and EPF cover this?

NPS v/s MF will be a never ending argument. However, here is the small buy important difference:

1) NPS is like a balanced MF. Tier1 is better than a MF from tax exemption perspective only. If is a great option for those who fall in the higher (there is nothing like highest these days) tax bracket.. You loose flexibility in this case though.

2) If you love balanced MFs, then NPS Tier 2 is better for you on account of lower expense ratios. MFs are very expensive in the long run.

3) For everything else, MFs will win. Better flexibility, more investment avenues and better services too. Better portability too.

I love index funds with low expense ratios :D
In the long term, the index usually beats the most highly paid fund managers.

As a private sector NPS beneficiary, there is no option to change the fund manager (it is the employer who decides). Look at the return for the last year....



In my case, had I invested the same amount in a plain vanilla bank FD, I would have been better off - even after factoring the tax benefit of Sec. 80C for the NPS contribution (not that I need it, because there are other contributions which take care of this) AND considering the tax that I would be paying out on the interest earned on bank deposits. Overall XIRR of 9.62% isn't comforting not only because the inflation adjusted present value of my contribution is next to nothing and compounding effect of the then prevailing bank interest would have been much higher.


To add clarity to the method of calculating interest - in addition to what I have stated above, I presumed that I had opened a RD for an amount which is contributed monthly to NPS and applied prevailing rate of interest (bank rates were in double digits when I started my contributions and are now half what they were then!) and reducing 30% of the interest as tax liability....

As far as annuity quotes go, here you are -



These are quotes for a surrender of Rs. 10 lakh - giving me a princely return of ~ Rs. 5,000/- per month (with return of principal when I die)!

What will be real return in the long run : 6+% quoted LESS inflation rate of say 3%? Pittance?

I need at least Rs. 1 crore to buy annuity if I need to meet my current expenses, which literally translates into putting at least Rs. 50,000/- per month in NPS over a period of a 8 - 10 years!

I don't want to comment or speculate on government policies. It's for a separate discussion, yes.

I believe MF and NPS have their own use. I don't see them as apples-apples.

For milestones, I rely on Equity and MF. These milestones are in itself designed to sustain me during retirement. However, if things don't go as planned I'll need back up funds. This is where EPF, PPF and NPS enter. EPF and PPF are great and I invest in them as well.

EPF maxes out my 80C and I invest a good chunk in PPF as well. However, I need to reduce my tax liability further so instead of putting any more in FD, PPF or MF, I put them in NPS since it gives me additonal 50k benefit.

I'm not reducing my MF investments to increase NPS.

I didn't know this. I joined NPS as an individual subscriber and we can change everything about our investment. Only articles also suggest a decent aggregated return rates. Definitely better than FD.

That definitely is a low return rate and makes no sense investing. Can't you opt out?

Also, don't plan NPS as your only retirement income. It won't make sense like that.

Agreed on your points. However what you are missing here is the tax benefit that you get immediately every year. Based on your tax bracket, that amount isn't a small amount. You get it immediately in your hand every year and you should consider that as an extra return that you are receiving. That is not available for all/any other alternatives once you exhaust your 80C limit.

However, this rigidity with the NPS manager and locking till 60 are for sure the negatives associated with the scheme in general.

But I believe you can stop your subsequent investments (opt-out going forward) for sure, if desired.

Even I have been a private sector NPS beneficiary (since 2017) and I am allowed to change the fund manager any time. So, you may want to check this thing once again?

I completely agree with you. I am contributing 10% of my salary towards NPS every month and the complete amount is tax exempted under section 80CCD(2). And I don't think, we have any other sections like this where there is no monetary limit.

Those returns are surprising. Do you have an 100% debt allocation? In that case it makes more sense to max out PPF VPF etc.. because debt funds are subject to volatility in interest rates and in any case bonds yield lower than PPF.

The whole point of NPS is that it is the only savings scheme that directly gives the exposure to equity markets.

Below is the returns of a 70% equity allocation.

Individuals can switch their fund manager. For me, being a subscriber through my employer (a corporate), the NPS portal doesn't allow switching. My HR team also confirms this.

Can't opt out, as the terms of employment make it mandatory. There is no other option, say PF, available.

Right. NPS should only one of the sources for income post retirement. The point I was trying to make is that the returns you estimate when one joins may not fructify when one actually retires....


In my case, there are already other investment options which will exhaust the Sec 80C by a good margin - i.e. contribution to NPS has no benefit to me under Sec 80C, since I have already breached the threshold of Rs. 1,50,000/- excluding NPS :-(

As regards the additional Rs. 50,000/- contribution benefit, if the returns are dismal even AFTER considering the upfront tax benefit (Rs. 15,000/- @30% in the highest tax bracket), is it worth contributing?


Thanks. But, in my case it isn't so. The portal doesn't allow me to switch. Please refer to the reply above.

As to why switching is important, the answer lies in the reply below.


Unfortunately, the fund manager decides the allocation based on the age of the employee. As I am close to retirement, my contribution has been predominantly in debt, resulting in abysmal returns.

One can definitely get the kind of return that you have achieved, if we diligently track the market scenario, fund manager's performance and re-balance the allocation periodically. In reality, how many people do actually take trouble to do this? One size fits all allocation pattern of the fund manager has been detrimental to me, I guess.

Relying only on NPS for retirement income, or even a couple of other annuity investments alone won't work - especially, if you have to lock the principal or dilute it by periodical withdrawal.

Better still would be plan in such a way that the income you generate post retirement still enables you to save a part of it! This is my pet peeve - because, if you achieve this you still have to pay taxes which eats away a good part. But, that, as they, is another story....:Frustrati

I was under the impression that your contribution is through section 80CCD(2), which is huge benefit for an employee. But looking at your response, I understand that it is not the case for you.
Also, you have mentioned that your employer is contributing to the NPS fund. But in my case, it is employee contribution but channelled through employer. And now if i think about it, that could be the reason they are not allowing to change the fund manager in your case (because, it is their money?) and I am able to change the fund manager (because it is my salary component?).

On of my colleagues who is in his early 30s and is working in the IT sector has started contributing to Atal pension yojana. I looked up some details about it and it doesn’t really feel worth the time and effort.

For example, to receive a monthly pension of Rs 5000, a person who signed up for the plan at the age of 40, should contribute Rs 1500 (Approx) per month till the age of 60.

Is this really a supplemental scheme that one can consider singing up for?

I think you are missing something - when you have such an engagement with employer, you will see three parts there:

1) Employee Contribution (Tier 1) --> Additional tax exemption (I believe it is now limited to 2lac p.a. and earlier it was unlimited)
2) Employer Contribution (Tier 1) --> No tax benefit
3) Additional Employee Contribution (Tier 1) --> Additional tax benefit for you limited to 50K. You can contribute more but benefit is limited at 50K

Coming to tax benefits --> In this case 2.5L will be tax exempt. Upper (not highest) tax bracket of 30% means you effectively save 77500 p.a. (31% of 2.5L) and you get it immediately in hand every year.

Consider it to be 31% return of your investment rather than saving. If your tax bracket is even higher, you save even more.

Now coming to the in-flexibility part:

1) If you have multiple employees wanting to switch and you intend to stay with same employer for long. You all can approach the company management and ask for switchover. They may do it but it will be for all.

2) If you are not satisfied with NPS at all, you can stop your contributions and hope for the best for the invested amount.

Correct. My PRAN is migrated to my employer. My monthly salary is deducted 'x' amount (as a % of some components) and my employer contributes 'x+y' - this amount i.e. {x + (x+y)} flows into my NPS account on monthly basis.

Remaining part on tax benefit is discussed below.


How the tax benefit works out is like this -

1. The amount paid by employer i.e. 'x+y' is added to my taxable income and then allowed as a deduction, subject to the ceiling stated.

2. The amount paid by me i.e. 'x' is eligible for deduction under Sec. 80C. However, as stated earlier, I have already exceeded the ceiling through other means.

Now, coming to the returns part -

Yes, the amount (x+y) paid by the employer is fully tax free. The contribution is mandatory and there is no leeway to vary the 'x+y' amount; and, since the investment goes into NPS, it yielded me a princely return of 2.3% last year.

So, neither can I effectively minimise my taxable income (through other exempt components of salary) nor do I have an option to exit NPS. 30% upfront tax benefit (which I would otherwise have to pay, had this amount been paid to me) - but wouldn't a similar benefit be available had the money been invested in say a PF account which would also be exempt but will provide better returns? In fact was thinking exempt (at the investment) - exempt (at the time of return accrual) - taxable (at the time of withdrawal) would be better as my income will be lower post retirement and I would get the benefits of Senior Citizen / Very Senior Citizen as I age.....

The change in fund manager is not feasible as NPS is not the only fund which is being managed and switching over in toto by the company appears to be remote.

Let us not a flog a dead horse! I have learnt to live with it - am nearing the exit stage, anyway :)

Just sharing my experience for the benefit of the (younger) set - and repeating what I have stated earlier, we need to manage even our retirement strategies correctly for it to bear fruit as envisaged.

IMHO, it is not worth it. This scheme is designed primarily for people in the unorganised sector, with low and unstable monthly income, to ensure that they are able to afford the small contributions and get guaranteed pension in the range of Rs. 1000-5000.

You will be better of investing the same or more amount in NPS, as that allows you to contribute more (APY contribution is fixed) with much better chances of accumulating a larger corpus. Additionally, at the time of maturity/retirement, you can withdraw upto 60% of the corpus amount and use the remaining for an annuity plan.

To give you an example, let me walk you through 2 scenarios:

Let's not forget about inflation and the actual value of Rs.5000 after 25+ years :coldsweat Hope this help you take a decision. You may also check this video for better explanation.
https://youtu.be/ZDpgEbEtSmc