NPS key features
| Feature | Detail |
|---|---|
| Minimum contribution | ₹1,000/year (Tier I) |
| Lock-in | Until age 60 (partial withdrawal from 3rd year for specific purposes) |
| Tax benefit | ₹1.5L under 80C + additional ₹50K under 80CCD(1B) |
| At maturity | 60% lump sum (tax-free) + 40% minimum annuity purchase |
| Annuity rate | ~6-7% from insurance companies (varies) |
FAQ
How much pension will I get?
Your pension depends on the annuity purchased. At retirement, you must buy an annuity with at least 40% of your corpus. At a ~6% annuity rate, a ₹40 lakh annuity gives ~₹20,000/month.
Is NPS better than PPF?
NPS has potentially higher returns (10-12% with equity exposure) but the annuity portion is taxable. PPF is EEE (fully tax-free) but capped at 7.1%. NPS is better for retirement-specific goals with its 80CCD(1B) extra deduction.