How to build a Rs 12 crore retirement fund? Financial expert tells how to do it using just EPF and NPS
zero income tax
under the new tax regime while building a
retirement corpus
worth over Rs 12 crore. Sujit Bangar, founder of TaxBuddy.com, shared this plan in a LinkedIn post, explaining how disciplined investing in Employees' Provident Fund (
EPF
) and National Pension System (
NPS
) can help achieve both tax savings and long-term financial security.
The two-instrument plan: EPF and NPS
Bangar recommends using a combination of EPF and NPS. He outlines a strategy for a 30-year-old earning Rs 75,000 a month. By contributing Rs 12,500 each to EPF (including the employer's share) and NPS, and assuming an 8% annual salary hike, the retirement savings can grow significantly. By age 60, the EPF corpus may grow to Rs 4.74 crore and the NPS corpus to Rs 7.42 crore, resulting in a combined
retirement fund
of Rs 12.16 crore. Most of this corpus would be tax-free.
Benefits of EPF and VPF
EPF offers an interest rate of 8.25% and tax-free maturity after five years. It also allows partial withdrawals. For higher returns, employees can opt for the
Voluntary Provident Fund
(VPF), contributing up to 100% of their basic salary. However, EPF has some liquidity constraints and should not be considered for short-term needs.
Why NPS adds flexibility
The NPS offers market-linked returns, which have historically ranged between 9–11%. Subscribers can choose how their funds are invested through the 'Active' option or allow automatic adjustments with the 'Auto' option. Upon retirement, 60% of the NPS corpus can be withdrawn tax-free, and the remaining 40% must be converted into an annuity. This gives a balance between flexibility and stability for post-retirement income.
How it helps avoid income tax
Under the new income tax regime, employer contributions up to 12% of basic salary to EPF and up to 14% to NPS are tax-exempt. According to Bangar, this makes it possible for individuals earning up to Rs 14.65 lakh annually to legally reduce their tax liability to zero—while continuing to grow their retirement savings.
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Step-by-step strategy
Bangar suggests a planned approach. In the early working years, use VPF for steady returns and select equity-heavy options under the NPS Active Choice. As retirement approaches, gradually shift the NPS corpus toward debt. After age 60, opt for a Systematic Lump-sum Withdrawal (SLW) from NPS to better manage tax impact during retirement.
Important warnings
Bangar advises that while EPF and NPS are powerful tools, they are not meant for emergency or short-term savings. EPF has limited liquidity, and 40% of NPS is locked into an annuity after retirement. He cautions against using them for anything other than long-term planning.
'Use them as the backbone of your retirement,' Bangar advises, 'but always consult a financial planner before locking in your strategy.'
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