My 80C section is filled for tax saving. In addition to this, I see that NPS provides 50K more for tax saving.

I am planning to go for NPS Tier-1 SBI funds - Government Securities. Does anyone know if it is wise to invest money in NPS for tax saving?


Does anyone know is it wise to invest money in NPS for tax saving ?

This is primarily opinion based. NPS is efficient retirement plan, allows to invest into Index equities with almost NIL expense ratios. The additional tax breaks makes the overall returns attractive.

The down side is 40% of corpus withdrawal is tax free, the balance 60% is taxable; alternatively one can buy annuity to make it tax free.

  • For example annuity product ? – N Sharma Jul 15 '17 at 8:22

The NPS is launched by The Government of India with a lot of hope. But it has not been taken off as it was expected due to some reasons. Though PFRDA is working for the betterment of the product, still there are disadvantages of the product, which I feel are: 1. The liquidity is an issue for NPS. If you are 30 years age and started investing for NPS you need to wait for another 30 years for withdrawal of money. 2. Though there is option of partial withdrawal, it's not so easy during requirement. 3. You need to invest in a government approved annuity fund which is mandatory. 4. The 20% of the maturity amount is still taxable if you withdraw it lump sum.

So, you should not invest in NPS only for the tax saving purpose.


Investing in NPS is a good stratergy for long term keeping in mind your retirement plans. However, the amount deposited in NPS gets locked till you are sixty. So, it depends on you wheather you want to pay few bucks to the government to enjoy the remaining money as you wish or you want to save the money till you are in your sixties. I hope the answer is useful.

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