National Pension Scheme (NPS) is a government initiative that enables its subscribers to contribute to his/her pension during the working life. This is a govt sponsored pension scheme launched in 2004. This scheme basically allows you to contribute a minimum of Rs 6000 per year in your own pension scheme and reap benefits post retirement. It is controlled by pension fund regulatory development authority (PFRDA). NPS Calculator is a tool which provides with the estimates regarding retirement fund you will receive at age 60. It computes the total amount receivable and interest gained.
Indian citizens between the age of 18 to 60 can opt for the scheme.
Minimum annual deposit should be Rs. 6000
Ages limit is 18 to 60 years
Withdrawal at the time of retirement is distributed into lumpsum and annuity scheme
Maximum 40% of the total corpus can be withdrawn tax-free
40% must be invested in annuity scheme for regular monthly income post retirement
Remaining 20% can also be invested in annuity plan or withdrawn as lumpsum with tax applicability.
Tier 1 Account: These accounts have restrictions on premature withdrawal. These are more of corporate accounts where in the employer also contributes to employee’s NPS account. Wipro was the first private organisation to start with NPS accounts for employees.
Tier 2 Account: These accounts are more of voluntary accounts which have no restriction over withdrawals. To open a Tier 2 account, Tier 1 account is mandatory.