Let us see National pension scheme, investment scheme in India below in detailed
The National Pension Scheme (NPS) is a government-backed retirement savings scheme launched in 2004 by the Pension Fund Regulatory and Development Authority (PFRDA), offering flexible, market-linked investments with tenure till age 60, historical returns of 10-12% p.a. (depending on asset allocation), and EEE tax benefits—(EEE means 1. Exemptions on investments up to ₹2 lakh under Sections 80C & 80CCD(1B), 2. Exemption on 60% lump sum at maturity (tax-free), 3. Exemption on annuity purchase proceeds). Designed for retirement-focused investors aged 18-65, it provides growth potential through equity/debt diversification, partial liquidity after 5 years, and guaranteed lifetime pension.
Where Should I Apply for an NPS Account?
Open NPS Tier-I accounts easily at these authorized locations with simple KYC documents (Aadhaar, PAN, photo, address proof):
- Post Offices: Select head post offices across India.
- Nationalized Banks: SBI, PNB, Bank of Baroda—any PoP branch.
- Scheduled Commercial Banks: HDFC, ICICI, Axis, Kotak designated branches.
- Online via e-NPS/Net Banking: PFRDA portal, SBI/ICICI/HDFC using Aadhaar eKYC (instant setup, no branch visit).
- Documents Required: Form, PAN, Aadhaar, 2 photos, nominee details (minors need guardian ID).
- Deposit Methods: NEFT/UPI/online transfer, auto-debit. Passbook/statement issued for tracking.
Guardian opens for minors, transfer accounts between banks/post offices anytime.
Eligibility Criteria
NPS welcomes all Indian residents aged 18-65 years, regardless of job or income:
- Kids (Minors under 18): Parents/legal guardians open and operate (PAN of guardian).
- Youth/Adults (18-65): Students, employed, self-employed, homemakers qualify (PAN card mandatory).
- Unemployed: Jobless youth, homemakers—no salary proof needed (PAN card mandatory).
- Senior Citizens (60+): Can join till 65 (PAN card mandatory).
One NPS Tier-I account per PAN, minors tie to guardian’s rules.
Who is Not Eligible
Restrictions ensure focus on resident individuals:
- NRIs: Can continue existing accounts but cannot open new accounts.
- Foreign Citizens/PIO/OCI: Unless Indian resident.
- Multiple Adult Accounts: Only one Tier-I per PAN (excess invalid).
- Joint Accounts: Not permitted (individual/guardian only).
- Institutions: Trusts, societies, companies cannot open accounts (only individuals).
Family Investment Example
In a family of 4—Father (PAN: ABCDE1234F), Mother (PAN: FGHIJ5678K), 2 kids (ages 5, 10)—each adult gets ₹2 lakh annual tax deduction limit:
Father’s NPS (PAN: ABCDE1234F): ₹1.5 lakh (80C) + ₹50k (80CCD1B) = ₹2 lakh max tax benefit
Mother’s NPS (PAN: FGHIJ5678K): Same ₹2 lakh limit for her account for tax benefit
Kids’ accounts: Guardian-operated, no separate tax limit
Key Rule: Limit is per PAN individual (min ₹1,000/year, no upper limit but tax benefit capped at ₹2L).
Key Features
- Tier-I Minimums: ₹500 to open, ₹500 per contribution, ₹1,000 minimum per financial year to keep active.
- Returns: 10-12% p.a. historical average (equity-heavy), compounded daily.
- Tenure: Till age 60, extendable in 5-year blocks indefinitely.
- Asset Classes: Equity (E up to 75%), Corporate Debt (C), Govt Securities (G), Alternatives (A up to 5%).
- Tax Benefits: ₹2 lakh deduction annually + 60% maturity tax-free.
How Returns Work in NPS
Market-linked returns by asset class managed by PFRDA-licensed fund managers:
- Compounding: Daily NAV-based growth credited to account.
- Taxation: 60% lump sum tax-free at 60, 40% annuity (purchase tax-free, pension income taxable).
- Strategy: Equity early for growth, shift to debt near retirement.
How to Calculate?
Use NPS calculators available in official sites.
Example 1: Full ₹1.5 Lakh yearly (30 years) → ₹2.71 crores
Example 2: Monthly ₹12,500 (30 years) → ₹2.85 crores
Loans, Withdrawals & Extensions
Loans: Not available.
Partial Withdrawals: After 3 years for medical/education/marriage/home (max 3 times, 25% of own contributions).
Extension After 60: 5-year blocks with/without deposits; full withdrawal flexibility.
Withdrawal & Annuity at Maturity (COMPLETE GUIDE)
At age 60: 60% tax-free lump sum + 40% buys lifetime monthly pension (continues to spouse in family plans).
Example: Your age is 30 now, considering return rate of interest as 10% (if rate of interest changes, below mentioned amounts might differ )
I have provided a NPS calculator in financial calculator page, please insert your values and check(if your trying to invest per year please divide it by 12 so u get that amount in months and then enter into months section)
Note – Here for investment of 1000/year gives 1.81 lakh corpus, with lumpsum of 1.09 lakh and annuity of 72,378 with monthly pension around 400/month.
But in Financial calculator provided in my website, for a investment of 83/month(it is also 1000/year), gives 1.89 lakh corpus, with lumpsum of 1.13 lakh and annuity of 75,673 with monthly pension around 440/month.
Difference is that 1.81 lakh corpus is, as our investment counted as end-of-year contribution(like invested at year end)
1.89 lakh corpus is, as our investment counted as start-of-the-year contribution(like invested at start of year)
This is all because start-of-the-year investment gives one extra year of compounding.
| Total Invested (per year) | Lump Sum (60%) Tax-Free (₹) | Annuity Investment (40%) (₹) | Est. Monthly Pension (₹) | Monthly Invested (Now 30 yrs, till 60 years) | Total Corpus |
|---|---|---|---|---|---|
| 1,000 (Tier-I realistic min) | 1,09,000 | 72,378 | 350 – 400 | ₹83/month | 1.81 lakhs |
| 10,000 | 10,90,000 | 7,24,000 | 3,500 – 4,000 | ₹830/month | 18.09. lakhs |
| 25,000 | 27,14,000 | 18,09,000 | 9,950 – 10,000 | ₹2,083/month | 45.24 lakhs |
| 50,000 | 54,28,000 | 36,19,000 | 19,500 – 20,000 | ₹4,166/month | 90.47 lakhs |
| 1,00,000 | 1,09,00,000 | 72,38,000 | 39,500 – 40,000 | ₹8,333/month | 1.81 crores |
| 1,50,00,000 | 1,63,00,000 | 1,09,00,000 | 59,000 – 60,000 | ₹12,500/month | 2.71 crores |
Special Rule: Corpus ≤ ₹5 lakhs = 100% tax-free lump sum (no annuity needed).
Common Mistakes & Penalties (Avoid These)
- Multiple Accounts: PAN tracks nationwide—account freeze.
- Miss Min Deposit: Tier-I becomes “inactive” (₹1k penalty to revive).
- Wrong Allocation: Low equity hurts long-term growth.
- No Nomination: Complicates claims at maturity.
NPS Investment Table (₹1.5L/year for 30 years @10%)
| Year | Amount Invested (₹) | Cumulative Investment (₹) | Approx. Balance (₹) | Tax Saved (₹) |
|---|---|---|---|---|
| 1 | 1,50,000 | 1,50,000 | 1,65,000 | 45,000 |
| 2 | 1,50,000 | 3,00,000 | 3,46,500 | 90,000 |
| … | … | … | … | … |
| 30 | 1,50,000 | 45,00,000 | 2,71,42,000 | 13,50,000 |
Final Totals:
Total Investment: ₹45,00,000
Maturity Value: ₹2,71,00,000
Lumpsum: ₹1,63,00,000 (1.63 crore) (60% tax-free)
Total Tax Saved (30% bracket): ₹13,50,000
Who saves ₹60,000/year? Income >₹15 lakh (old tax regime). And who invests 2L/year
Here we taken example of 1.5L/year, So here we get is 45,000 tax save per year.
| Tax Slab | Annual Tax Saved | Total 30 yrs Tax Saved |
|---|---|---|
| 30% (>₹15L) | ₹60,000 | ₹13,50,000 |
this annuity table need much clarty for users can u do it again clearly simpler way tabular way
NPS Annuity Types: Simple choice table (Age 60 Decision!)
₹50 Lakh Annuity Investment = Choose 1 of These 4 Options:
| Option | Who Gets Pension? | What Happens When YOU Die? | Monthly Pension | Best For |
|---|---|---|---|---|
| 1️⃣ Single Life | YOU only | ❌ Stops completely | ₹30,000 (Highest) | Single person |
| 2️⃣ Life + Return | YOU only | ✅ ₹50L back to kids | ₹22,000 | Married with kids ⭐ |
| 3️⃣ Couple Life | YOU → Spouse | ❌ Stops after spouse | ₹25,000 | Married couple |
| 4️⃣ Couple + Return | YOU → Spouse | ✅ ₹50L back to kids | ₹20,000 (Lowest) | Married + kids |
One Glance Decision Table
| Your Family | Pick This | Monthly Income | Family Safety |
|---|---|---|---|
| Single | Single Life | ₹30,000 | ❌ None |
| Married (No Kids) | Couple Life | ₹25,000 | ✅ Spouse |
| Married + Kids | Life + Return | ₹22,000 | ✅ Kids get ₹50L ⭐ |
| Kids Priority | Couple + Return | ₹20,000 | ✅ Spouse + Kids |
NPS Annuity: No extra cost + Perfectly clear timing!
1. Extra Cost for Annuity Options? NO EXTRA CHARGES!
₹50 Lakh corpus = ₹50 Lakh buys annuity (NO service fee). Different options give DIFFERENT pension amounts ONLY. Higher pension (Single Life) = No extra cost. Lower pension (Family safety) = No extra cost. Insurer profit built-in.
2. When to Choose? EXACTLY AT AGE 60
Age 60: Get corpus → Pick 1 annuity type → Sign with insurer. Submit choice WITH exit application (same form). PFRDA approves → Money transfers to insurer. 1st pension starts 15-30 days later.
3. Can Change Mind Later? ONCE CHOSEN = FINAL!
No editing after signing. Choose carefully at 60 (consult family!). Family situation changes? Live with decision.
SUPER SIMPLE Annuity Decision (₹50 Lakh Investment):
Option 1: Single Life – You only gets pension ₹30,000/month. When YOU die? Stops completely. Best for: Single person.
Option 2: Life + Return – You gets ₹22,000/month + Kids get ₹50L back. When YOU die? ₹50L returned to kids. Best for: Married with kids (MOST POPULAR).
Option 3: Couple Life – You + Spouse gets ₹25,000/month. When YOU die? Spouse continues till their death. Best for: Married couple.
Option 4: Couple + Return – You + Spouse gets ₹20,000/month + Kids get ₹50L. When YOU die? ₹50L returned to kids after spouse death. Best for: Married + kids.
EXACT Process Timeline:
Day 1: Age 60 → Submit NPS exit form + Pick annuity type
Day 7: PFRDA approves → 60% lump sum in bank
Day 15: 40% transfers to insurer (LIC/HDFC Life)
Day 30: 1st pension starts (₹22k deposited)
Forever: Monthly pension till death ✓
No need to worry now about annuity, still much time left for that phase, then you can decide. This is all about NPS investment scheme in India.
Conclusion
At age 30, continue investment until 60 years, Start with ₹1,000/year → ₹1.81L corpus → ₹400/month pension for life!
Similarly, Start with ₹10,000/year → ₹18.09L corpus → ₹4000/month pension for life! No more doubts—everything explained clearly.
Tax free highest amount, invest 2L/year → ₹3.62Cr corpus → ₹80,000/month pension for life!
Good information
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