What is NPS and how does it work?+
NPS (National Pension Scheme) is a government-backed voluntary pension scheme open to all Indian citizens aged 18-70. You contribute monthly/annually, money is invested in equity, bonds, or government securities based on your choice. At retirement (age 60): 60% lump sum (tax-free) + 40% must buy annuity (monthly pension, taxable). NPS is managed by Pension Fund Regulatory and Development Authority (PFRDA).
What is the tax benefit of NPS?+
NPS offers three tax benefit sections: 80CCD(1): Up to 10% of salary (or 20% of gross income for self-employed) within the ₹1.5 lakh 80C limit. 80CCD(1B): Additional ₹50,000 deduction exclusively for NPS — over and above ₹1.5 lakh 80C limit. Total potential deduction = ₹2 lakh. 80CCD(2): Employer's NPS contribution up to 10% of salary (Basic + DA) — no upper limit, not counted in 80C.
Which is better — NPS or PPF?+
NPS advantages: Higher potential returns (10-12% vs PPF 7.1%), extra ₹50,000 tax deduction (80CCD(1B)), employer contribution possible. PPF advantages: Fully flexible withdrawal (partial from year 7), no annuity requirement (100% lump sum), guaranteed returns, complete tax-free maturity. NPS is better for retirement corpus building; PPF is better for flexibility and guaranteed returns.
What are NPS equity returns in India?+
NPS equity fund (Tier-I Scheme E) has delivered: 5-year returns (2019-2024): 14-17% p.a. across different pension fund managers. 10-year returns: 12-15% p.a. Top performers: SBI Pension Fund, LIC Pension Fund, HDFC Pension Fund. NPS allows maximum 75% equity allocation up to age 50, reducing gradually thereafter (lifecycle fund). Auto-choice option reduces equity as you age.
Can NRIs invest in NPS?+
Yes, NRIs (Non-Resident Indians) can invest in NPS Tier-I accounts. Requirements: Indian citizenship (NRIs, OCI card holders are eligible), NRE/NRO bank account, Indian mobile number. NRIs can claim 80CCD deductions if they have Indian taxable income. However, on maturity, annuity purchase may be restricted; NRIs can take lump sum. Check PFRDA guidelines for current NRI-specific rules.