NPS or Mutual Funds? Which is a better investment option for retirement?
Answer
Answer
Union Cabinet has approved a proposal of tax exemption limit to 60% of the NPS scheme. This lead to a a wave of happiness among investor.
Earlier 40% of the corpus was exempted from tax, while 60% was taxed. But now with this new change, NPS corpus amount becomes 100% free and thus this brings a debate that whether it is better than Mutual fund? So let us compare them.
NPS
Mutual Fund
Lock-in Period
3 years
3 year (ELSS)
Charges or Expenses Ratio
1.5% - 2.5%
0.01%
80C
Yes
Yes
Both, NPS and ELSS Mutual fund seems to be similar in every aspects except for gains, as how gains will be treated is yet not clear. So, till now NPS comes at par at ELSS Mutual fund. But Mutual fund gives a wide investment option for different risk profile investors so Mutual fund is better than NPS in my personal view.