What is NPS (National Pension System)?
NPS is a Government-backed retirement savings scheme regulated by PFRDA. You contribute monthly (or lumpsum) into a mix of Equity (E), Corporate Debt (C), Government Securities (G) and Alternative Investment (A) funds. At age 60, 60% is tax-free lump sum and 40% must buy an annuity for monthly pension.
Who can open an NPS account?
Any Indian citizen aged 18–70 (salaried, self-employed or NRI). Min contribution ₹500 (non-tier-I) or ₹1,000 (tier-I); minimum yearly ₹6,000 in tier-I.
How much can I save in tax via NPS?
Under Section 80CCD(1B), you get an extra ₹50,000 deduction over and above the ₹1.5 lakh 80C limit. So total tax-saving potential is up to ₹2 lakh/year (80C + 80CCD(1B) + 80CCD(1) from employer contribution).
What is the default asset allocation in NPS?
Active choice subscribers pick E/C/G/A in any % (max 75% equity till age 50, then tapering). Auto choice subscribers get a life-cycle fund that reduces equity as you approach age 60.
What is the annuity part of NPS?
At retirement, you must use at least 40% of the corpus to buy a life annuity from an empanelled insurer (LIC, SBI Life, ICICI Pru, etc.). The annuity rate is around 5–6% p.a., giving you a monthly pension for life.
