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AMFI · ARN-356973

PSS VenturesWealth · North East
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National Pension System

NPS — retirement saving with its own tax deduction

NPS Tier-I is a PFRDA-regulated, market-linked retirement account whose fund-management charge is capped at roughly 0.09% a year. Section 80CCD(1B) adds a ₹50,000 deduction that sits outside the ₹1.5 lakh 80C ceiling rather than competing with it — which is what makes it worth a second look once 80C is already full.

In one paragraph

NPS lets you contribute monthly or annually into a mix of equity (max 75%), corporate bonds, government securities, and alternatives, managed by PFRDA-appointed Pension Fund Managers at an annual cost of about 0.09%. Withdrawal: at age 60, take 60% as a lump sum (tax-free) and use 40% to buy an annuity. The catch is that annuity income is taxable at slab and Indian annuity rates (6–7%) are below long-run equity returns — so optimise for the tax deduction, not the eventual pension.

Extra ₹50,000 deduction under 80CCD(1B) on top of the ₹1.5L 80C ceiling.
Fund-management charge of roughly 0.09% a year, set by PFRDA rather than by the fund manager.
Auto and Active choice — pick equity allocation up to 75%.
Tier-II is liquid (no lock-in, no tax benefit) — useful as a low-cost equity fund alternative.
Partial withdrawal up to 25% allowed after 3 years for specific purposes (education, marriage, medical).
Why this is currently lead-only

PFRDA POP-SP registration is pending. In MVP we route NPS leads to a licensed POP partner and our advisor walks you through the eNPS flow on the Protean / KFin CRA portal. Phase 2 enables direct contributions through our integrated CRA connection.

POP-SP registration pending; transactions enabled in Phase 2.

Related

Frequently asked questions

Is NPS the same as PPF?
No. PPF is sovereign-fixed (7.1% currently) with a 15-year lock-in. NPS is market-linked, locks until age 60, and has a separate tax deduction (80CCD(1B)). Different instruments for different goals.
What's a Pension Fund Manager?
PFRDA empanels a list of fund managers (HDFC, ICICI Pru, SBI, LIC, UTI, Aditya Birla, Tata, Kotak, Max Life). You pick one when opening NPS; can change once a year. They manage the equity / debt / govt-bond sleeves at a regulated low cost.
Why does NPS force a 40% annuity?
It's a regulatory mandate to ensure post-retirement income, not just lump-sum withdrawals. The annuity is bought from a PFRDA-empanelled insurer (LIC, HDFC Life, SBI Life, etc.) at the prevailing market rate.
Can I exit NPS before 60?
Yes, but only 20% can be taken as lump sum and 80% must go into an annuity. The lump-sum portion is tax-free; annuity income is taxable. This is why NPS is genuinely a retirement product — early exit is punitive by design.
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