CIT vs PF vs SSF: where to put your next रू 1,000 of retirement money in Nepal

A friend texted me last Saturday: "Bonus came in. रू 40,000 extra. Should I put it in CIT?"

He's on a basic of रू 60,000, employer is on SSF, already contributing the standard 11%. The honest answer took about three messages. The reasoning behind it took an hour over coffee on Sunday.

This post is that reasoning, written down. Not "what is CIT" — we covered that in the salary-slip walkthrough. This is the harder question: given that you already have PF or SSF running, where should the next रू 1,000 of retirement money go?

The three vehicles, briefly

You probably already have a sense of these. A one-line refresher on each, then we move to the decision.

• Provident Fund (PF). 10% from you, 10% matched by your employer, into the EPF in your name. Employee portion is tax-deductible.
• Social Security Fund (SSF). 11% from you, 20% from your employer. Bundles retirement, gratuity, and a stack of insurances. Employee portion is tax-deductible. Most large private firms have moved here from PF.
• Citizen Investment Trust (CIT). Voluntary. You decide what to contribute, the money sits in CIT and earns annually-declared interest, and the contribution reduces your taxable income.

You see PF or SSF on your slip, never both. CIT sits alongside whichever one you have.

Why "next रू 1,000" is the right framing

The PF/SSF percentage is fixed by law and by your employer's registration. You can't dial it up or down on a whim. Asking "should I increase my SSF" is mostly the wrong question — that lever doesn't exist for the employee.

What you actually decide, every month, is:

• Do I top up CIT this month, and by how much?
• Does this year's bonus go to CIT, an FD, a SIP, or my bank account?
• If I have spare cash beyond the deduction cap, where does it go?

Those are the real choices. Frame retirement saving as a series of next रू 1,000 decisions, and the answer becomes much cleaner.

The tax math on a marginal रू 1,000

CIT's headline benefit is the deduction. The deduction is worth your marginal tax rate, not your average rate — the slab the next रू 1,000 of income would have fallen into.

Your slab	Tax on रू 1,000 of income	Tax saved by routing it to CIT
1% (SST band)	रू 10	रू 10
10%	रू 100	रू 100
20%	रू 200	रू 200
30%	रू 300	रू 300
36%	रू 360	रू 360

The mental model: every रू 1,000 you put in CIT, the government effectively chips in your-marginal-rate of it. At 30%, you're saving रू 1,000 of your money but the cost to you is only रू 700 because the other रू 300 would have gone to TDS anyway.

That's on top of the interest CIT pays on the balance. The deduction is a one-time benefit per contribution; the interest compounds for as long as the money sits there.

At the 1% slab, the saving is रू 10 on रू 1,000. Real, but not life-changing. If your budget is tight, a रू 1,000 buffer in your savings account is genuinely more useful than रू 10 of tax saved against locked-up money.

The combined cap (and why it matters)

PF/SSF and CIT share a single deduction ceiling. The exact figure changes with each year's budget — historically the lower of one-third of assessable income or a fixed ceiling around रू 5,00,000 per year, whichever is less. The current IRD circular is the only authoritative source; your HR will know the live number.

The cap matters because contributions above it still go to CIT and still earn interest, but they don't reduce that year's tax. At that point CIT is competing on returns alone — and it's not always the winner.

A worked example. Suppose your annual SSF (employee) contribution is रू 66,000 and the combined cap this year is रू 3,00,000. You have रू 2,34,000 of CIT room before the deduction stops working. That's your runway. Anything beyond it — congratulations, you have a higher-class problem, but it's a different decision.

Liquidity: the part nobody talks about until they need it

Tax savings are easy to compare. The hidden cost of long-term vehicles is liquidity, and the three rank differently here.

• PF (EPF). Withdrawal at retirement, on resignation (subject to conditions), or for specified purposes — housing, medical, education. Reasonably accessible if you change jobs.
• SSF. Designed to behave like a pension. Pre-retirement access is more restrictive than EPF — that's the price of the richer employer contribution and the bundled insurance.
• CIT. Withdrawals at retirement or resignation, plus partial withdrawals against balance for housing, medical, and similar purposes once you meet the holding conditions. More flexible than SSF, less than a savings account.

None of these is a substitute for an emergency fund. If you're tempted to push the emergency-fund money into CIT for the deduction, don't. The deduction is real, but the day you need three months of expenses now, you don't want to be filling out withdrawal forms.

The order is: emergency fund first, then PF/SSF (which is happening automatically anyway), then CIT.

Returns: roughly comparable, with caveats

Historical interest rates on PF, SSF, and CIT have hovered in a similar 7–9% range, declared annually. Nobody is winning this comparison by a wide margin on returns alone.

What differentiates them in practice:

• Compounding window. Money you put in CIT at 25 has 35 years to compound. The tax break + 35 years of compounding is hard to beat with anything that doesn't involve equity.
• Insurance bundle. SSF's 20% employer contribution includes medical, accident, maternity, and dependents' coverage. If you'd otherwise buy these privately, the headline employer percentage understates the benefit.
• Behavioural friction. All three are illiquid by design. That's a feature when you're trying to save for 30 years and a bug when life surprises you.

A decision framework

Where the next रू 1,000 of long-term money goes, in rough order:

1. Is your emergency fund full? (Three months of essentials, in a regular savings account.) If not, put it there. Nothing else matters yet.
2. Are you in the 20%+ tax slab and below the combined cap? Put it in CIT. The tax break alone is doing serious work, and the interest compounds on top.
3. Are you in the 10% slab and below the cap? CIT is still worth it, but the urgency is lower. If you have a specific medium-term goal (down payment, wedding, education), an FD or mutual fund SIP can compete.
4. Are you in the 1% slab? Skip CIT for now. Build the emergency fund, then let savings sit in a regular or FD account where you can actually reach it. The tax saving is too small to justify the lock-in.
5. Are you above the cap? The deduction has run out. CIT is competing on returns alone. Mutual fund SIPs, NEPSE, and longer FDs all become reasonable alternatives, depending on horizon and risk appetite.

What to do beyond the cap

This is the question my friend was actually asking with his रू 40,000 bonus. He was already past the cap for the year — every additional CIT रू was earning interest but not saving tax.

The general hierarchy beyond the cap:

• 5+ year goals. Mutual fund SIPs in a low-cost equity scheme. NEPSE direct equity if you have the temperament and time, with a portion you genuinely won't check weekly.
• 1–5 year goals (down payment, wedding, vehicle). Fixed deposits laddered across maturities, or a debt-heavy mutual fund.
• Under 1 year. Stay in regular savings or short-term FDs. The yield difference is small and not worth the lock-in.

The one thing not to do: park it in a regular savings account by default for years on end. Inflation in Nepal averages 5–7%; a 5–6% savings account barely keeps up.

Tracking it in an app

In Kharchapatra, treat retirement contributions consistently:

• PF/SSF (employee portion). Already deducted from your gross before net pay arrives. Don't log it as an expense — that's a double count, the same trap covered in the salary-slip post.
• CIT (auto-deducted via payroll). Same principle. The deduction comes out before your net.
• CIT top-ups paid manually (a lump-sum from a bonus, say). These are a real outflow from your bank, so log them as a transfer to a "CIT" account, not as an expense. They're savings, not spending.

The cleaner the categorisation, the more honest your savings rate looks at the end of the year.

What you actually need to decide

Two questions, asked once a year:

1. What's my marginal tax slab this year? That tells you how hard CIT is working for you.
2. How much room do I have under the combined cap? That tells you the runway.

If the slab is 20%+ and there's room, the next रू 1,000 goes to CIT. If the slab is low or the cap is full, look elsewhere — but don't default to "let it sit in the bank account." Idle savings is the quietest leak in a Nepali household budget.

Already past the cap and wondering what to do with the rest? That's the question we'll cover next: where to put long-term money once the tax shield is exhausted. Email parjanya57@gmail.com if there's a specific angle you want covered.