NPS vs SIP: Here we are explaining to you the special features of both SIP and NPS in simple language, so that you can decide for yourself which option will be best for you.
Nowadays people have started thinking about their retirement planning in advance. For this, some do Mutual Fund SIP, while some consider NPS (National Pension System) better. But the question is where will you get more returns in the long term? And which option is more convenient and beneficial?
If you are also in the same confusion, then here we are explaining to you the special features of both SIP and NPS in simple language, so that you can decide for yourself which option will be best for you.
Talking about returns, SIP can come out ahead
In Mutual Fund SIP, the investor can decide himself whether to invest money in equity fund or debt. If you choose equity fund for long term, then you can get a return of up to 10–15% per annum. Whereas in NPS, the equity share is limited (maximum 75% in Tier-1).
Therefore, the return from NPS is usually between 8–10%. The range of returns in SIP is higher, but the risk is also a little higher.
NPS is more beneficial for saving tax
If your aim is to save tax, then NPS is a good option. In this, you can get a deduction of up to ₹ 1.5 lakh under 80C and an additional ₹ 50,000 under 80CCD (1B). That is, a total tax saving of up to ₹ 2 lakh. Whereas in SIP, tax benefit is available only in ELSS funds and in that too, exemption is only up to ₹ 1.5 lakh under 80C.
In SIP, you can stop investing, withdraw money or increase or decrease the investment amount whenever you want. That is, you have complete freedom. But there are strict conditions for withdrawing money in NPS. You can withdraw the entire money only at the time of retirement. And even then you will get 60% of the amount in lump sum, and you will have to buy pension from the remaining 40%.
Which is safer?
NPS is a government-supervised scheme and its funds are invested in the stock market as well as government bonds and debt instruments. Therefore, there is less volatility in it. If you choose equity funds in SIP, the risk is higher, but the returns can also be better accordingly.
Which is better for whom?
If you are employed, want to save tax and want a safe and fixed plan for retirement, then NPS will be better for you.
If you are looking for higher returns, can take a little risk, and want to make money according to your goals, then SIP is a better option for you.
So what to do? SIP or NPS?
Let us tell you that both have their own importance. If you want, make NPS the base of your retirement security and also make money for different goals through SIP. With this, you will get the benefit of tax savings, returns and liquidity. If you are thinking about retirement planning then take the right decision according to your convenience.
