SIP Vs NPS On ₹10,000 Monthly: What Will Grow Your Retirement Fund Faster?

When it comes to long-term investment planning , even a consistent ₹10,000 monthly contribution can make a significant impact. But the question remains: where should you invest it—SIP or NPS? According to experts, both these options offer distinct benefits, risks, and outcomes. While SIPs are linked to market performance and known for flexibility, the NPS brings a structured pension element with tax advantages. This article compares both strategies over a 20-year period, highlighting potential corpus creation, tax perks, and retirement value.

Understanding How SIP Works

A Systematic Investment Plan (SIP) is a disciplined method of investing in mutual funds. Investors contribute a fixed amount at regular intervals—usually monthly. SIPs are market-linked, meaning the returns vary depending on the performance of the underlying mutual funds.

One of the key advantages of SIPs is the power of compounding. Over time, the returns earned on both principal and previously accrued gains create exponential growth. SIPs also offer flexibility: you can start, pause, increase, or decrease contributions depending on your financial comfort.

₹10,000 SIP For 20 Years: Potential Returns

Assuming a monthly investment of ₹10,000 for 20 years with an expected annual return of 12%, the total investment over the period would be ₹24 lakh. Under compound growth, this could grow into a corpus of approximately ₹91.99 lakh.

Experts suggest that the compounding effect becomes significant after the 10th year, where the returns begin to outpace the total invested amount. This makes SIPs especially powerful for long-term goals like children’s education, home purchase, or early retirement.

SIP Investment Summary:

• Monthly investment: ₹10,000
  
  
  
• Tenure: 20 years
  
  
  
• Total investment: ₹24,00,000

Expected annual return: 12%

Maturity amount: ₹91,98,574

Estimated total returns: ₹67,98,574

What Is NPS and How It Works

The National Pension System (NPS) is a government-backed retirement scheme. It is available to Indian citizens between 18 and 70 years of age. Aimed at creating a pension corpus, the scheme requires long-term investment, out of which 60% can be withdrawn tax-free upon retirement, while the remaining 40% must be used to purchase an annuity plan that pays regular pension.

Investments in NPS are diversified between equity, corporate debt, and government securities. Under the Active Choice model, investors can decide the asset allocation—up to 75% equity in some cases.

₹10,000 NPS For 20 Years: Estimated Returns

Using NPS Trust’s calculator with a monthly investment of ₹10,000 for 20 years and assuming an annualised return of 12.59%, the estimated total corpus would be ₹98.89 lakh. Of this, ₹59.33 lakh could be withdrawn as lump sum, while the remaining ₹39.56 lakh would be converted into an annuity, offering a monthly pension.

Assuming a 7% annuity rate, this would result in a monthly pension of ₹23,075 post-retirement.

NPS Investment Summary:

• Monthly investment: ₹10,000
  
  
  
• Tenure: 20 years

Annualised return: 12.59%

Total corpus: ₹98,89,426

Lump sum withdrawal: ₹59,33,656

Monthly pension: ₹23,075

Assumed annuity rate: 7%

Key Differences: NPS Vs SIP

While both options reward discipline and long-term planning, they cater to different investment objectives. SIPs are better suited for those seeking liquidity, market exposure, and wealth creation. NPS, on the other hand, appeals to those prioritising retirement security and a consistent post-retirement income.

From a tax-saving perspective, NPS provides an additional ₹50,000 deduction under Section 80CCD(1B), over and above the ₹1.5 lakh deduction under Section 80C, making it more attractive for tax planning. SIPs, when linked to ELSS (Equity Linked Saving Schemes), offer tax benefits under 80C but are subject to long-term capital gains tax beyond ₹1 lakh.

What Should Investors Choose?

Experts suggest that the right investment choice depends on your financial goals. If your focus is on building a flexible, liquid, high-growth corpus and you have a high-risk appetite, SIPs are more appropriate. However, if your goal is structured retirement with tax efficiency and guaranteed pension income, NPS may be more beneficial.

Many financial planners recommend a blended strategy—combining SIPs for aggressive growth and NPS for pension security—to balance returns and risk while ensuring income during retirement.

Investing ₹10,000 per month over 20 years, whether through SIPs or NPS, can build a sizeable financial corpus. Both options have proven benefits, but their suitability depends on your goals, risk profile, and retirement planning strategy. A careful evaluation or consultation with a certified financial advisor is strongly recommended before committing to either route.

Disclaimer: This article is intended for informational purposes only. Calculations are based on illustrative examples and assumptions. For personalised advice, please consult a SEBI-registered financial advisor or certified retirement planner.