What is NPS?
The National Pension System is a government-backed, low-cost retirement savings scheme. Contributions grow at market-linked returns (typically 9–11% for equity-heavy allocations). At age 60, you can withdraw 60% as a tax-free lumpsum and must use the remaining 40% to buy an annuity that provides a monthly pension.
NPS Tax Benefits
Contributions up to ₹1.5 lakh under section 80C plus an additional ₹50,000 under 80CCD(1B) are tax deductible. Employer contributions (up to 10% of basic salary) are also deductible under 80CCD(2).
Frequently Asked Questions
What return should I assume for NPS?
9–11% for equity-heavy (Auto LC75 or Active E 75). 7–8% for debt-heavy allocations.
Can I exit NPS early?
Partial withdrawal is allowed after 3 years for specific purposes. Premature exit before 60 forces 80% into annuity.