NPS: National Pension System#
What is NPS?#
A voluntary retirement savings scheme managed by PFRDA for retirement planning.
Types of Accounts#
Tier I Account
- Mandatory pension account
- Withdrawal restrictions
- Tax benefits under 80CCD(1)
Tier II Account
- Voluntary savings
- No lock-in
- No tax benefit on contribution
Investment Options#
- Auto choice (lifecycle based)
- Active choice (self-select)
Fund Managers#
- 8-10 fund managers to choose from
Tax Benefits#
| Component | Deduction |
|---|---|
| Employee contribution | Up to ₹50,000 (80CCD(1B)) |
| Employer contribution | Up to 14% of salary (80CCD(2)) |
| Additional (budget) | Up to ₹50,000 (above 80C limit) |
Withdrawal Rules#
Premature Withdrawal
- Allowed after 3 years
- 80% must buy annuity
- 20% tax-free lump sum
Normal Withdrawal
- After 60 years
- 60% tax-free
- 40% to buy annuity
Annuity Options#
- Lifetime annuity
- Annuity for certain period
- With or without return of purchase price