Which is better - Superannuation vs NPS

 The National Pension Scheme has been available to the public for over eight years, and more and more investors, business owners, and self-employed people are showing interest in it. This article aims to discuss why this is happening and also compare NPS to superannuation, which is a kind of pension benefit provided by employers but often ignored by employees.

NPS, which is a central government initiative, encourages Indian residents to save for their post-retirement life. It is available to private job professionals, public sector employees, and self-employed individuals with a maximum turnover of Rs 1.5 crore. Subscribers must allocate a certain amount of their income at predetermined intervals and receive a lump-sum payment and monthly pension at maturity. The scheme also provides a 40% to 60% tax benefit on the investment amount.

Benefits of NPS for subscribers include voluntary contribution, little risk, highest standards of transparency, and up to 10% yearly growth or return on investment. Subscribers also have the option to change their fund manager if they are unhappy with their current return.

On the other hand, superannuation is a post-retirement benefit provided by companies and organizations to their employees. It is also called a company pension scheme and provides up to 33% tax benefit while filing the return. There are two types of superannuation benefits: defined benefit schemes and defined contribution plans.

While both NPS and superannuation may look similar, there are significant differences when it comes to tax benefits. NPS provides a 60% tax-free amount, while superannuation funds offer a 33% tax-free fund on retirement. Moreover, there are no GST charges in NPS, whereas you have to pay 1.8% GST on superannuation. Thus, if you want substantial benefits during your retirement, it is better to consider NPS over superannuation. Below is a detailed overview of the same to better understand it.

 Superannuation vs NPS

	Superannuation Benefit	NPS or National Pension Scheme
The maximum limit for the employer for contribution to schemes	It can be 15% of an employee’s salary but not more than Rs 1,50,000 per employee. 10% of the employee’s salary, including DA (dearness allowance)	The contribution by the employer under IT Act’s section 80CCD 10% of the salary of employee and DA is eligible to get tax benefit available under section 80CCE There should not be any monetary ceiling on employer
The maximum limit for an employee to contribute to schemes	An employer can make up to Rs 1,50,000 per anum contribution in a superannuation scheme as per IT act’s section 80C.	Employee contribution is eligible for deduction under 80CCD (I) of IT Act that includes 10% of basic salary + DA if applicable, but deduction amount can not be more than Rs 1,50,000. Additional benefits can include up to Rs 50,000 under section 80CCD 1(B) of the IT Act. Some other benefits that are exclusively available to NPS,
Benefits	Lump-sum amount but not more than 33.33% of accumulations or 50% if there is no gratuity. An annuity is a taxable amount and taxed based on Income Tax Slab Rate.	The lump-sum amount should not be more than 60% of the amount, or it can be 20% if the withdrawal happens before maturity. The annuity amount can be a minimum of 40% in typical cases and 80% if the withdrawal happens before maturity and is taxed based on age group.

Conclusion

Superannuation and NPS are both different plans that are related to retirement benefits. In both the plans, you get a lump-sum amount and annuity benefit. But for tax benefits, you get 33% tax-free income in superannuation benefits whereas 60% in NPS. Also, NPS provides a better return for its subscribers than superannuation. Therefore, many corporations and individuals have started preferring NPS to avail of tax benefits.