NPS — National Pension System Complete Guide
NPS is a government-sponsored retirement savings scheme offering market-linked returns and additional tax benefits of ₹50,000 under Section 80CCD(1B).
How NPS Works
Monthly/annual contributions invested in equity, corporate bonds, and government securities. Choice of Active (you choose allocation) or Auto (age-based allocation). Two accounts: Tier 1 (retirement, locked in) and Tier 2 (flexible, no tax benefit).
Tax Benefits
Section 80CCD(1): Up to 10% of salary (within 80C limit of ₹1.5L). Section 80CCD(1B): Additional ₹50,000 deduction (over and above 80C). Section 80CCD(2): Employer contribution up to 10% of salary (no limit). Total NPS tax benefit can be ₹2L+.
Returns
Equity (E): 12-14% CAGR over 10 years. Corporate bonds (C): 8-10%. Government bonds (G): 7-9%. Choose aggressive allocation (75% E) if retirement is 15+ years away.