📖 Understanding National Pension System (NPS)

National Pension System (NPS) is a government-backed retirement savings scheme regulated by PFRDA. It allows you to build a retirement corpus through regular contributions during your working years and receive a pension after retirement.

NPS invests in a mix of equity (E), corporate bonds (C), and government securities (G). You can choose auto allocation (lifecycle fund) or active choice where you decide the asset mix. Equity exposure is capped at 75% for those below 50 years.

At retirement (age 60), you must use at least 40% of the corpus to purchase an annuity (pension plan). Up to 60% can be withdrawn as lump sum, which is completely tax-free. The annuity income is taxable as per your slab.

Tax Benefits: ₹1.5 lakh under Section 80CCD(1) (part of 80C limit), additional ₹50,000 under Section 80CCD(1B), and employer contribution up to 10% of salary under Section 80CCD(2). NPS is one of the most tax-efficient retirement products in India.