Question 1

What is NPS (National Pension Scheme)?

Accepted Answer

NPS is a government-backed retirement savings scheme regulated by PFRDA. It invests in a mix of equity, corporate bonds, and government securities based on your choice. It offers tax benefits under Sections 80CCD(1), 80CCD(1B), and 80CCD(2).

Question 2

How much tax can I save with NPS?

Accepted Answer

NPS offers tax benefits up to Rs. 2 lakh: Rs. 1.5 lakh under Section 80CCD(1) (within 80C limit) and an additional Rs. 50,000 under Section 80CCD(1B). Employer contributions up to 14% of salary (central govt) or 10% (others) are also deductible under 80CCD(2).

Question 3

What is the NPS lock-in period?

Accepted Answer

NPS has a lock-in until age 60. At maturity, you must use at least 40% to buy an annuity (pension), and up to 60% can be withdrawn as a tax-free lump sum. Partial withdrawals (up to 25%) are allowed after 3 years for specific purposes like education, medical treatment, or home purchase.

Question 4

What returns can I expect from NPS?

Accepted Answer

NPS returns are market-linked and vary by asset allocation. Historically, Tier-I NPS equity funds have delivered 10-14% CAGR, corporate bond funds 8-10%, and government bond funds 7-9% over 10+ year periods. Actual returns depend on your chosen fund manager and asset mix.

NPS Calculator

NPS Calculator