EPF vs NPS- Big news for investors. Especially if you are planning for invest on something, then this article is for you. Companies have now started giving the option of investing in NPS along with EPF to private job holders. If you also work in the private sector and want to create a big fund for retirement, then in which of the two options would it be right to invest money? If there is any confusion about this, then know the right decision from the experts. This will also help you in creating a big fund in the future and saving tax.
In fact, salaried people usually keep in mind the National Pension Scheme (NPS) and the Employees’ Provident Fund (EPF) while planning their retirement. Anyone can invest in NPS, but EPS is only for those who are employed. At present, some employers give employees the opportunity to choose both options. At present, not all employers offer NPS, but if your employer does, you can request them to make the employer contribution a part of your salary.
What is the difference between the two?
As per NPS rules, employees are not required to contribute to avail employer benefits and can request their employers to keep their contribution at any level, which can be up to 14% of basic salary. In case of EPF, it is 12%. Employer contribution to EPF is mandatory for employee contribution, which will usually be the same amount i.e. 12%.
Where more tax will be saved
Employer’s contribution to NPS is a part of the gross salary. Tax exemption is also available on this. Employer’s contribution to EPF, which may be a part of your CTC, is completely tax free. However, if the total contribution to NPS, EPF and other superannuation funds exceeds Rs 7.5 lakh per annum, then tax will be levied on the excess amount.
Which has more flexibility?
If we talk about flexibility between EPF and NPS, then NPS will be better in this case. This is because when changing jobs, employees have to transfer their EPF to the new employer. Both the old and the new employer play a role in this. On the other hand, there is flexibility and continuity in NPS, because it does not require the approval of the employer to stop the contribution or transfer the account.
In which you will make more money
The returns generated through NPS are market-linked and give the benefit of compound interest at a higher rate than EPF. This means that along with getting higher interest in NPS, one also gets the benefit of compounding. On the other hand, the return rate from the Provident Fund Scheme i.e. EPF is determined annually by the Employees Provident Fund Organization (EPFO), which is 8.25% for the financial year 2025. There is also no benefit of compounding on this.
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