What Is NPS?
NPS is a government-backed retirement scheme regulated by PFRDA. AUM: ₹13 lakh crore. Available to all Indians aged 18-70.
Tier 1 vs Tier 2
| Feature | Tier 1 | Tier 2 |
|---|---|---|
| Lock-in | Till 60 (partial after 3 yrs) | No lock-in |
| Min opening | ₹500 | ₹1,000 |
| Tax benefit | 80CCD(1) + 80CCD(1B) | None (except govt employees) |
Tax Benefits — The NPS Advantage
- 80CCD(1): Up to ₹1.5L (within 80C limit)
- 80CCD(1B): Extra ₹50,000 — unique to NPS, over and above 80C
- 80CCD(2): Employer contribution — works in BOTH old and new regime, no cap
Total potential deduction: ₹2 lakh+ per year.
4 Asset Classes
| Class | Invests In | Risk | 10-Year Return |
|---|---|---|---|
| E (Equity) | Nifty 50, large caps | High | 12-14% |
| C (Corporate Bonds) | AAA-rated bonds | Medium | 9-11% |
| G (Govt Securities) | Government bonds | Low | 8-10% |
| A (Alternative) | REITs, InvITs | Medium | Varies |
Active vs Auto Choice
Active: You choose allocation (max 75% equity till age 50). Auto (LC75): System manages — starts aggressive, reduces equity as you age. Under 35? Go Active with 75% equity.
Fund Manager Comparison (10-Year Equity Returns)
| Fund Manager | Equity (E) |
|---|---|
| SBI Pension Fund | 13.8% |
| UTI Retirement Solutions | 13.5% |
| HDFC Pension | 13.2% |
| ICICI Prudential | 13.0% |
| Kotak Pension | 12.8% |
| LIC Pension | 12.5% |
| Aditya Birla SL | 12.3% |
Exit Rules at 60
- 60% lump sum — tax-free
- 40% must buy annuity — taxable as income
- If corpus under ₹5L — 100% lump sum allowed
NPS vs PPF vs ELSS vs EPF
| Feature | NPS | PPF | ELSS | EPF |
|---|---|---|---|---|
| Returns | 9-14% | 7.1% | 10-15% | 8.25% |
| Lock-in | Till 60 | 15 years | 3 years | Till retirement |
| Tax on maturity | 60% exempt | 100% exempt | 12.5% LTCG | Exempt |
| Extra ₹50K deduction | Yes (80CCD1B) | No | No | No |
How to Open NPS Online
- Go to enps.NSDL.com
- Click "Registration" → "Individual"
- Enter PAN, Aadhaar, bank details
- Choose fund manager and asset allocation
- Pay ₹500 minimum first contribution
- Get PRAN (Permanent Retirement Account Number)
Charges: 0.01-0.09% fund management fee — lowest in India.
Related Reading
Retirement Calculator
How much do you need?
- Factor in inflation-adjusted expenses
- Account for EPF, NPS, and PPF contributions
- See your retirement readiness score