Opted New Tax Regime – Should I stop investing in PPF, SSY, and NPS?

If you have opted new tax regime, you may be questioning whether it is still beneficial to invest in PPF, SSY, and NPS. Let’s clear this dilemma.

Investors are constantly on the lookout for tax advantages when considering an asset or product to invest in. They seek out opportunities that offer tax benefits not only at the time of investment but also throughout the investment process and when it comes time to withdraw funds. The appeal of products that provide these advantages, known as EEE (Exempt-Exempt-Exempt), is undeniable.

Therefore, out of all the available options, PPF, SSY, and NPS shine brightly because of their tax advantages. However, it is important to note that if you choose the new tax regime, you will not receive the same tax benefits as you do under the old tax regime. As a result, some investors prefer to stick with the old tax regime and avoid opting for the new one.

For investors who have chosen the new tax regime over the old one, the question of whether to continue investing in PPF, SSY, and NPS products is a common dilemma.

Opted New Tax Regime – Should I stop investing in PPF, SSY, and NPS?

Let’s redirect our attention from a single response to individually evaluating each product and coming to a decision.

# Public Provident Fund (PPF)

You probably already know that this is one of the most outstanding debt products currently available for investors, offering incredible EEE benefits. However, it does come with a few restrictions, such as a 15-year lock-in period and limitations on investments (maximum of Rs.1,50,000 per year).

If you have set long-term goals that extend beyond 15 years, this debt product is perfect for you. Therefore, if you have already started investing with a specific goal in mind and the PPF is an important debt component of your asset allocation, it is important to continue investing without any breaks. You do not need to bother about tax benefits available or not.

If your main reason for investing was to save on taxes, it’s important to reassess the product features based on your financial goals before making a decision. In my opinion, I recommend either continuing to invest or keeping the account active with a small contribution.

It’s important to keep in mind that depending solely on this one product to reach your long-term financial objective isn’t a smart choice. Therefore, it’s advisable to include it as a component of your debt portfolio.

Refer my earlier posts on PPF –

# Sukanya Samriddhi Yojana (SSY)

SSY stands out as a top choice among debt instruments for securing your girl child’s future. Consequently, numerous individuals are opting to invest in this scheme due to the tax advantages it offers both at the time of investment and upon maturity. However, for those who have chosen the new tax regime, the question of whether to persist with investing in SSY may arise once more.

As to the Public Provident Fund (PPF), it is worth noting that the Sukanya Samriddhi Yojana (SSY) is also considered to be an excellent debt instrument. However, it is not advisable to solely rely on this particular product for securing your daughter’s future. This is primarily due to the fact that educational inflation is increasing at a rate exceeding 8%. In order to ensure diversification, it is essential to include equity investments alongside the SSY.

Hence, if you started investing in SSY as a debt part of your girl child’s future, then you must continue. if your decision to opt for SSY as an investment is solely for tax benefits, it is advisable to reconsider.

Read my earlier posts on SSY –

# National Pension System (NPS)

It is designed to help you achieve your retirement goal. However, numerous individuals disregard its purpose and instead invest in NPS solely to take advantage of the extra tax benefits. It is important to keep in mind that NPS has its own set of pros and cons as well. (Refer to my earliest post – “National Pension Scheme (NPS) – 5 Biggest Disadvantages“).

Investing in NPS solely for the purpose of tax saving should not be your only consideration. Instead, prioritize finding an investment option that suits your individual needs. If you genuinely believe that NPS is the ideal retirement product for you, then proceed with it. However, if you are already a subscriber to NPS and have doubts, it would be wise to contribute a minimal amount. In my post (link shared above), I have outlined the reasons why I am not particularly fond of NPS.

Conclusion- Tax planning is an essential component of financial planning. However, if you investment decisions solely based on tax benefits, then this may lead to poor investment choices. It is crucial to carefully evaluate each product or asset, considering both its advantages and disadvantages. Make sure that the features align with your financial goals before making any decisions. Avoid making hasty decisions simply because of a new tax regime.