Question 1

What is the National Pension System (NPS) in India?

Accepted Answer

NPS is a voluntary, defined-contribution retirement scheme regulated by PFRDA. Subscribers build a pension corpus through regular contributions invested across equity, corporate debt, and government securities. At retirement, a portion must be used to buy an annuity and the rest can be withdrawn lump sum, subject to rules.

Question 2

What tax benefits does NPS offer?

Accepted Answer

Employee contributions qualify under Section 80CCD(1) within the overall 80C limit. An additional ₹50,000 deduction is available under Section 80CCD(1B) for self-contribution. Employer contributions may qualify under 80CCD(2) for salaried subscribers. Rules and limits change — verify current IT provisions before investing.

Question 3

What is the difference between Active Choice and Auto Choice in NPS?

Accepted Answer

Active Choice lets you set equity, corporate bond, and government security allocation within PFRDA caps. Auto Choice adjusts allocation by age (Aggressive, Moderate, or Conservative lifecycle). Compare fund managers’ past performance and charges after you pick an asset mix suited to your retirement horizon.

Question 4

When can I withdraw money from NPS?

Accepted Answer

Tier I NPS is designed for retirement — partial withdrawals are allowed for specific goals (education, marriage, house purchase, critical illness) after 3 years, within limits. At age 60 (or as per exit rules), you must annuitise at least 40% of corpus unless the amount is below the threshold notified by PFRDA.

Question 5

What is the difference between NPS Tier I and Tier II?

Accepted Answer

Tier I is the default retirement account with tax benefits and withdrawal restrictions. Tier II is a voluntary savings account with flexible withdrawals and no exclusive 80CCD(1B) benefit. Tier II requires an active Tier I account. Use Tier I for retirement goals and Tier II only if you need liquidity with discipline.

Question 6

How do I choose an NPS fund manager?

Accepted Answer

PFRDA appoints multiple pension fund managers (PFMs). Compare historical returns, asset allocation limits, and PFM charges — not just headline returns. You can change your PFM once per financial year. Use our side-by-side table to compare schemes before you open or transfer an NPS account.

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