How does NPS work at retirement?
At retirement (60, or up to 75 if deferred), you can withdraw up to 60% of your NPS corpus as a tax-free lump sum. The remaining at least 40% must be used to purchase an annuity — a plan that pays you a regular pension for life. The pension itself is taxable as income in the year you receive it.
What determines my NPS returns?
NPS lets you split contributions across equity, corporate bonds, and government securities (in Active choice), or auto-adjusts the mix by age (in Auto choice). Equity exposure is capped at 75% and reduces as you approach retirement. Historical returns have generally ranged 8-12% annually, but this varies with market conditions.
Is NPS a good option for retirement savings?
NPS offers an additional ₹50,000 tax deduction under Section 80CCD(1B), over and above the ₹1.5L Section 80C limit — making it attractive for maximizing tax savings. The trade-off is lower liquidity (locked in until 60, with limited partial withdrawals) and the mandatory annuitization, which typically offers lower returns than the accumulation phase.