NPS

 

The National Pension System (NPS) is a government-backed retirement savings scheme in India. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) and is designed to provide financial security after retirement.

Key Features of NPS

  • Eligibility: Open to Indian citizens aged 18 to 70 years.
  • Investment Options: Funds are invested in equity, corporate bonds, and government securities.
  • Tax Benefits: Contributions are eligible for tax deductions under Section 80CCD(1B).
  • Withdrawal Rules: At retirement, 60% of the corpus can be withdrawn tax-free, while 40% must be used to purchase an annuity for a regular pension.
  • Flexibility: Subscribers can choose their fund manager and asset allocation.

Types of NPS Accounts

  1. Tier I Account (Mandatory)

    • Long-term retirement savings with restrictions on withdrawal.
    • Minimum annual contribution: ₹1,000.

  2. Tier II Account (Optional)

    • Works like a savings account with no withdrawal restrictions.
    • No tax benefits.

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