NPS vs UPS: There is a pension guarantee in UPS. There is no pension guarantee in NPS. It depends on the performance of the funds chosen by the investors. UPS investments are mainly in government bonds. NPS investors get additional tax exemption under section 80CCD (1B). Under this, an additional deduction of Rs 50,000 can be availed.
NPS vs UPS: All central government employees will get the option to choose between NPS and UPS from April 1, 2025. NPS was started in January 2004. It replaced the Old Pension Scheme (OPS). It is applicable in all central government departments. Now UPS will be applicable from April 1, 2025. Returns in NPS scheme depend on market conditions. UPS is a guaranteed pension scheme. There is less risk in it. This is because it has the support of the government. Under UPS, the government will contribute 18.5 percent of the basic salary and dearness allowance. At the same time, the employee’s contribution will be 10 percent.
UPS has guaranteed pension
UPS has guaranteed pension. There is no pension guarantee in NPS. It depends on the performance of the funds chosen by the investors. UPS mainly invests in government bonds. NPS offers the option to invest in equity, debt and other market-linked funds. The government’s contribution in UPS is higher than NPS. This provides a stable pension after retirement. NPS, on the other hand, has more risk. This is because it is completely dependent on the market.
Understand the complete math here
A person starts a government job at the age of 25. After this, he retires at the age of 60. In such a situation, under UPS, if his average salary is Rs 2 lakh per month, then he will get a pension of Rs 1 lakh per month. This will be according to the 50 percent pension rate set by the government. Pension in UPS increases every year according to inflation. On the other hand, if a person invests Rs 16,800 every month in NPS, then he can get a pension of Rs 1 lakh at the age of 60.
Take advantage of tax exemption like this
NPS investors get additional tax exemption under section 80CCD (1B). Under this, an additional deduction of Rs 50,000 can be availed. This is in addition to the deduction of Rs 1.5 lakh under section 80C. Thus, NPS investors can get a total tax benefit of up to Rs 2 lakh. If a person falls in the 30 percent tax slab. In such a situation, he can save tax up to Rs 62,400 by investing in NPS.
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