I am 45 and have a mf sip of about 35k per month. I have about 13 lac in equity and 24 lac in mf. About 20 lac in epf. Am I 30 pc income tax Slab. After the new tax regime, is it a good idea to invest in nps (14% of basic) or should I avoid and divert the amount to mf sip??

Ans: Understanding Your Current Financial Status

You are 45 years old and in the 30% tax slab.

Your mutual fund SIP is about Rs. 35,000 per month.

You have Rs. 13 lakh in equity and Rs. 24 lakh in mutual funds.

Your EPF balance is around Rs. 20 lakh.

You are considering investing 14% of basic in NPS.

You are evaluating if this is better than increasing SIP.

Let’s analyse both choices in detail.

Understanding NPS – Features and Benefits

NPS is a retirement-focused product regulated by the government.

It has a defined structure with auto and active choice options.

60% of the corpus is tax-free at retirement.

40% has to be used to buy an annuity.

Annuity income is taxable as per your slab.

There is a lock-in till age 60.

You cannot withdraw freely like mutual funds.

You can claim deduction under section 80CCD(2).

Employer contribution is not counted in your Rs. 1.5 lakh 80C limit.

It is over and above that and reduces your taxable income.

NPS returns vary based on equity-debt allocation.

On average, long-term returns range between 8% and 10%.

New Tax Regime – Implications for NPS

In the new tax regime, most exemptions and deductions are removed.

However, employer contribution to NPS under 80CCD(2) still continues.

You can claim up to 14% of basic (for central/state govt employees).

For private sector, the limit is 10% of basic.

So, tax-saving under new regime depends on employer contribution.

Your own voluntary contribution won’t give deduction under new regime.

If you shift fully to new tax regime, personal NPS becomes tax-ineffective.

Employer contribution remains beneficial in both regimes.

In short, NPS still works if employer contributes.

Comparing Mutual Fund SIP and NPS

Liquidity:

Mutual funds offer full liquidity after one year.

You can redeem in part or fully any time.

NPS is locked till 60 years of age.

Partial withdrawal is allowed in limited cases only.

Flexibility:

In mutual funds, you can choose scheme types.

You can pause, change, or switch SIPs anytime.

NPS allows some fund manager choice but is rigid overall.

Returns:

Mutual funds, when chosen rightly, give superior long-term returns.

They offer equity diversification with active management.

You already have SIPs, which shows your discipline.

SIPs in active mutual funds beat inflation and create wealth.

Taxation:

Equity mutual funds have updated rules:

LTCG above Rs. 1.25 lakh taxed at 12.5%.

STCG taxed at 20%.

Debt mutual funds taxed as per income slab.

NPS corpus has partial tax exemption.

But annuity income post-retirement is taxed fully.

Mutual funds offer better tax efficiency in withdrawal phase.

Goal-Based Suitability:

NPS is only for retirement goal.

You cannot use it for education, marriage, or emergencies.

Mutual funds can be mapped to multiple goals.

They offer better alignment with personal priorities.

Should You Increase SIP Instead of NPS?

Yes, based on multiple reasons:

You already have EPF for retirement.

EPF and NPS both serve the same purpose.

Adding mutual funds brings diversification to your portfolio.

Your equity allocation right now is modest.

Increasing SIPs can enhance long-term wealth creation.

SIPs give control, flexibility, and goal alignment.

You are already disciplined with Rs. 35,000 SIP.
Increasing SIP further will give more compounding advantage.

Let’s explore how to use mutual funds in a more structured way.

Mutual Fund Strategy – From Here Onwards

Segment SIPs by goals – retirement, travel, child’s education.

Use actively managed funds for all allocations.

Avoid index funds. They just copy the market.

Index funds don’t offer downside protection.

Active funds give better performance in tough markets.

You need a fund manager who adds value.

Index funds cannot switch out of bad sectors.

Active funds have flexibility and research-based management.

Also, avoid direct funds.

Why Not to Invest in Direct Funds

Direct funds lack human guidance.

No one reviews your portfolio regularly.

You may skip rebalancing and lose potential.

Investors often stop SIPs during corrections.

Direct plans can result in behavioural mistakes.

Regular plans through MFD with CFP support you better.

You get portfolio tracking, switching suggestions, and tax support.

Peace of mind is more valuable than slightly lower expense ratio.

EPF + Mutual Funds + SIP = Smart Retirement Plan

Your EPF gives stability and guaranteed corpus.

Your mutual fund SIPs offer equity growth.

You don’t need NPS if EPF is already contributing 12%.

SIPs with EPF form a better duo than EPF + NPS.

SIPs give full access before and after retirement.

EPF is taxable on interest if it crosses Rs. 2.5 lakh per year contribution.

Yet it offers safe fixed income exposure.

Use EPF as a fixed return anchor.
Use mutual funds to beat inflation.

NPS – When to Consider It Seriously

You may consider NPS if:

You are in old tax regime and claim 80CCD(1B) deduction.

Employer contributes and it reduces tax for you.

You want a dedicated product for post-60 life.

You are not planning to retire before 60.

But if you are considering early retirement or flexible planning:

NPS will not help before 60.

You cannot withdraw bulk amount without tax impact.

You will be forced to take annuity which gives low return.

Mutual funds can give you Systematic Withdrawal flexibility.

360-Degree Wealth Management Tips for You

Continue SIPs regularly.

Increase SIP every year as income rises.

Don’t exit mutual funds due to market ups and downs.

Avoid adding too many funds. 4 to 5 are enough.

Have a written goal plan with timelines and amounts.

Use liquid funds or arbitrage funds for short-term goals.

Use hybrid funds for medium term needs.

Use equity mutual funds for long-term goals like retirement.

Avoid mixing investment and insurance.

Do not forget risk protection.

Risk Management – Don't Ignore

Check your term insurance cover.

Have a health insurance outside of employer.

Cover your family with adequate sum insured.

Protecting your income is more important than saving tax.

Mutual funds and EPF grow wealth.

Insurance protects wealth and lifestyle.

Role of a CFP-backed MFD

Helps you decide SIP amount based on your goals.

Reviews SIP performance every 6 to 12 months.

Recommends fund switches when needed.

Keeps you disciplined during market corrections.

Tracks tax rules and helps optimise redemptions.

A certified financial planner sees the full picture.

Finally

NPS has its benefits but is rigid and retirement-specific.

You already have EPF, so you are covered for retirement.

Mutual fund SIPs give higher growth, flexibility, and tax control.

Instead of increasing NPS, increase SIP with goal-based planning.

Avoid direct funds and index funds. Prefer active funds with regular plans.

Use a certified financial planner for guidance and tracking.

You are already doing well. Now take the next step towards financial freedom.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment