National Pension Scheme is a Central Government-backed savings scheme that aims to build a retirement corpus for the citizens of India.

Let’s take a closer look at the provisions of the NPS.

• It is mandatory for central government employees to subscribe to NPS.
• Other than employees of the Central Government, others can voluntarily contribute to NPS
• Contributions to NPS must be made consistently until the age of 60.
• The minimum annual contribution of INR 6,000, with a minimum monthly contribution of INR 500, is necessary to be eligible for tax deductions under Tier 1 of the NPS.
• The minimum annual contribution to the NPS is INR 2,000 with a monthly contribution of INR 250, is mandatory for claiming deductions under Tier 2 of the NPS.
• It offers a wide range of investment instruments to select from – Government securities, fixed income-bearing instruments, and equity funds. However, the latter cannot exceed 50%.
• It’s a cost-effective market-linked investment scheme.
• It allows partial withdrawals of up to 25% on specific situations based on the reason behind the withdrawal.
• It enables individuals to withdraw 60% of the proceeds in a lump sum, while the remaining 40% has to be reinvested into an annuity plan.
• For deferred exit, 80% of the withdrawal proceeds must be reinvested in the annuity.

Investment eligibility in NPS

Any individual taxpayer between the ages of 18 years and 60 years can voluntarily contribute towards the National Pension Scheme. The individual can be a citizen of India, including Non- Resident Indians, but not extending to HUF (Hindu Undivided Family).