Money problem? No problem! Mutual Funds vs NPS: Find out what will give you greater profit

Mutual Funds vs NPS: MFs are one of the most attractive investment options among the salaried, which is mostly made up of middle class. This class invests to accumulate money for various goals that includes, marriage, children, car, house and more. From the day they begin their career to the day they retire and even beyond retirement, they cannot depend on just their salary to pay for these goals and needs. Yes, investors need help and that is where mutual funds and NPS come in. So, it becomes important to not just generate greater profit via investment but also ensure full income tax exemption too. So, Mutual Funds vs NPS, what is better?  

Well, NPS looks better as it allows an investor to avail income tax exemption on Rs 50,000 investment in NPS under Section 80 CCD(1B) while in ELSS mutual fund investment one can get Long Term Capital Gain (LTCG) Tax exemption of up to Rs 1 lakh income.

Explaining the tax part involved in the ELSS mutual funds and NPS, Balwant Jain, a Mumbai-based investment and tax expert said, "ELSS mutual funds investment is flexible while NPS investments require strict financial discipline. In ELSS mutual fund, an investor has a lock-in period of 3 years while in NPS, the lock-in is till the investor attains 60 years of an age limit. In ELSS, the investment made can be claimed for income tax exemption under Section 80C while in the case of NPS, the investor can get up to Rs 50,000 tax exemption under Section 80 CCD(1B) even when the investor has availed Rs 1.5 lakh tax exemption under Section 80C."

Speaking on the return that an investor can expect under the ELSS mutual funds and NPS; Manikaran Singh, a SEBI registered tax and investment expert said, "The ELSS mutual funds has 100 per cent equity exposure while in NPS, the exposure is lesser and hence in long-term, the return is expected to be more in mutual funds than in the NPS."

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However, to get the best returns, Singh added, "It's better to diversify the portfolio and allocate funds in both the plans. In my opinion, one must invest up to income tax exemption limit in the NPS i.e. Rs 50,000 if he or she has that ability to invest and rest of the amount has to be invested in ELSS mutual funds."