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Should I invest in NPS or ELSS? Best for retirement and savings

I want to know whether income tax benefit under Section 80CCD(1B) is available on contributions to National Pension Scheme (NPS) for 2016-17? Also, what do you recommend - NPS or ELSS if one has a long-term view of, say, 20 years and want to get tax benefit on corpus at the end?
- Siva Kumar

Image result for nps vs elss


You can contribute to National Pension System (NPS) and claim an extra deduction of up toR50,000 under Section 80CCD(1B) in the financial year 2016-17.
If you are looking for a tailor-made government sponsored scheme to invest for your retirement, you can consider investing in National Pension Scheme (NPS). But you should opt for it only if you are prepared to hold on to your investments till your retirement at 60 years. On your retirement at 60, you have to use a minimum 40 per cent of the corpus to buy an annuity. You can withdraw the rest of the money, but it would be added to your income and taxed as per the Income Tax slab applicable to you. If you are withdrawing the money before 60 years, you have to use at least 80 per cent of the money to buy an annuity. You can withdraw the rest of the money, but it would be taxed as per your Income Tax slab.
If you can take care of your long-term investments on your own, you can go ahead with your investments in Equity Linked Savings Schemes (ELSSs) or tax planning mutual fund schemes. These schemes come with a lock-in period of three years, but it is not necessary that you have to sell them after three years. You can hold on to your investments as long as the scheme is performing well. ELSSs has the potential to offer you better returns as they invest almost the entire corpus in equity, whereas NPS can invest only up to 50 per cent of the corpus in equity. Returns from ELSS are tax-free as long-term capital gains tax on equity investments sold after a year is nil at the moment.



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