EPF Vs NPS Comparison and benefits

Employee Provident Fund is older concept than New Pension Scheme. When old pension scheme stopped, new pension scheme arrived as an alternative. For a salaried employee both make importance as far as secure growth, tax reduction and employment convenience is concerned.

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In this article of EPF Vs NPS Comparison and benefits we are not only going to understand the difference between EPF Vs NPS and their advantages but also focus to know about EPF and NPS and how they helps us to make profitable investment in their own way.

How each of them help you for secure and grow your earned income.

What is EPF ?

EPF is Employee Provident Fund. It is controlled by Employee Provident Fund Organization under the ministry of Labour and Employee, Government of India. EPFO make provision of Provident Fund, Pension Scheme and Insurance Scheme by taking contribution from both Employee and Employer.

Benefits of EPF

Employee Provident Fund provides following benefits to each employee. The first condition is one must be a employee.

An employee need to contribute 12% of basic salary and dearness allowance to PF account every month regular basis up to the date of retirement.
An employer need to contribute again 12% of basic salary and dearness allowance to employee.
From 12% , 8.33% of Basic+DA deposited to Pension account of Employee,
3.67% of Basic+DA deposited to PF account of Employee.
On top of that 0.5% of Basic + DA is provided to EDLI( Employee Depository Linked Insurance) account, where employee get life insurance benefits. For information, nominee of employee or Family members of employee get up to Rs. 7 lakh incase of death of employee.
Annual compound interest is given by government to PF accumulated amount which gathers a corpus amount at the time of retirement or superannuation.
A recurring pension amount is given to employee at the time of retirement.
Earlier less pension used to received to employee, now the eligible employee can choose higher pension scheme where employee can contribute to their pension account from the higher basic salary instead of government ceiling Rs. 1500.
EPF also have provision to take loan and advance at emergency time with zero interest rate.
An employee can declare his or her nominee through online called e-Nomination by providing name address and the percentage of corpus to be given in UAN portal.
UAN (Universal Account Number) is created to club all the PF number into single and usable platform.

What is NPS ?

NPS is National Pension System . It is regulated under Pension Fund regulatory & development Authority (PFRDA) working under the jurisdiction of Ministry of Finance. NPS provides Pension to retired employee and extends support of Old age security to all person by virtue of receiving contribution.

Benefits of NPS

Usefulness of NPS is given below,

NPS is easily accessible to all person. Both salaried employees and Non salaried professional take the profit of NPS. One can easily operate NPS on PROTEAN App.
It is Tax efficient. An employee can reduce its tax burden by contributing into NPS. By opting NPS one can get extra Rs. 50,000/- per year .
The scheme is flexible to your financial plan. There is no binding limit set for depositing of contribution.
NPS is choice based voluntary scheme which is provides lumpsum and recurring income after retirement of employee in a 60 : 40 basis.
The contribution amount of the contributors are linked to Stock market. Thus possibility of higher growth is found in NPS.
The one who opts the scheme has choice to select the Fund manager of various Funds operating under NPS.

Comparison between EPF & NPS

For EPF one must be an Employee whereas anybody can opt NPS.
EPF is Statutory, but NPS is voluntary.
EPF is regulated under Ministry of Labour and Employment, however NPS is regulated under Ministry of Finance.
EPF provides provisions of Provident Fund, Pension and Insurance scheme whereas NPS provides only pension benefits to retirees.
EPF is not linked to Stock Market where as in NPS scheme, money growth is depends on stock Market.
EPF caries secure growth and low risk, in contrast, NPS caries high returns and high risks.
Interest rate of EPF is decided by Government of India whereas interest rate of NPS depends on Stock Market.
EPF act as an component coming under 1.5 lakh Tax reduction whereas NPS provides extra Rs. 50,000 as tax benefits to an employee.

Before going to conclude in our topic of EPF Vs NPS Comparison and benefits, let us find out some setbacks each of investment options.

Setbacks of EPF :

One needs to be an employee under any establish for coming under the purviews of EPF.

Government decides every year about the interest rate, which provides slow ROI (Return on Investment) as compared to stock market.

Setbacks of NPS :

It is linked to the behavior of stock market. When market is down ,ROI of NPS is low.

One can not withdraw all maturity amount. Mandatorily 40% diverted into annuity plan for recurring income in old age.

Conclusion: EPF Vs NPS Comparison and benefits-What is better to you ?

As we understand the pros and cons of EPF and NPS, now I hope it will be easy to decide what is better to you.

In my opinion, in this competitive world you choose both the option get the profit of both scheme.

Let me remind you don’t forget to post your valuable feedback in the comment section. It may hardly take your time, however it helped me a lot and encourage me write more for you.

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EPF Contribution