![]() “For some people, saving for a long-term goal that stretches too far into the future is not a priority. Young people can’t visualise themselves in that situation.”Īnother reason for the lukewarm response to NPS is that retirement figures low on the priority of young investors. “Saving for a goal that stretches too far into the future is not always a priority. Hyderabad-based financial adviser Nitin Vyakaranam, who provides financial wellness advice to employees of corporates, says barely 5-6% employees opt for the NPS benefit. It can’t get any better for investors,” says Nehal Mota, co-founder of wealth advisory platform Finnovate. “The tax benefits and features of the NPS are unmatchable. That’s surprising, because saving tax has traditionally been the biggest driver of investment decisions in India. Even though NPS can save a big chunk of tax, not many employees sign up for the scheme. ![]() Millions of taxpayers like Sethi have let this opportunity pass. I could have saved almost Rs.3 lakh in tax since 2016,” he says glumly. ![]() “The HR person did not fully explain how the scheme works. He also didn’t utilise the additional Rs.50,000 deduction under Sec 80CCD(2). His company rolled out the NPS benefit almost seven years ago, but Sethi was clueless how it could help him. Why are investors staying away from an option that offers greater tax efficiency? The biggest impediment for the NPS is the abject lack of awareness about the features and benefits of the scheme. “Had the HR person explained to me the tax benefits of NPS, I could have saved almost Rs.2.5 lakh in tax in the past seven years.” He has now opted for the NPS benefit under Section 80CCD(2) wherein his company will put 10% of his basic salary in the scheme. Though his company introduced the NPS benefi t in 2016-17, Sethi was not aware how it can reduce his tax till he approached ET Wealth for tax optimisation. The growth during the accumulation period is also not taxed, switching in and out of funds has no tax implication and 60% of the corpus is tax free on maturity. Contributions are eligible for exclusive tax breaks that are not available to any other investment option. The pension scheme offers everything one may look for in a retirement product. “The NPS alone could have reduced his tax by more than Rs.51,000,” says Sudhir Kaushik, Founder and CEO of Taxspanner.Ĭhanges in tax rules, introduction of investor-friendly features and greater flexibility have combined to make the NPS more attractive during the past decade. Tax filing portal Taxspanner analysed his tax details and found that Sethi was not availing many of the deductions available to him, including the NPS benefit offered by his company and investing in the scheme on his own. ![]() Shocked by the high tax outgo, the Delhi-based product manager wrote to ET Wealth, searching for ways to reduce his tax liability. Their salary is roughly the same level, but last year Gurpreet Sethi paid nearly Rs.1 lakh more in tax than some of his co-workers. ![]()
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