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National pension scheme is kind of investment for the every person who get monthly salary from any organization whether the person are from public or private sector ,which has been initiated by the government of India in 2004 .

The only motive is to initiate this scheme is to motivate the every individual towards saving so that they could save their a part of income while their working period so that they don’t need to do work anymore to run their live .at the starting it has made just for the government employees but at the last by the concern of government every person can take benefit of this scheme and the only condition is the investor should be a Indian citizen between the age of 18 to 60 years. Even NIRs also can be the beneficiary of the scheme until they don’t change the status of their citizenship the most amazing thing is about the scheme is it is portable, means investors can take benefit without even worrying about switch the job or the place .

Basically NPS provides two kinds of accounts to their investors, the first one is Tier 1 and the second one is Tier 2 but both accounts have their own ways to work,

  • Tier 1: In this account every investor is mandated to have at least 6000 per annum and the investor can’t withdraw the amount without attaining the age of retirement and that is 60 years.
  • Tier 2: this account is a optional so that investor can withdraw their money at anytime but they need at least 1000rs to open the account and should have minimum amount 2000 at end of the year.
  • Swavalamban scheme: This scheme is running specially for those who are financially weak and working with autonomous body and still don’t have regular income and for that government pays 1000rs for the 4 years .

Now you must be thinking that can investor withdraw their all amount after the retired age or if not, than what the procedure to claim that amount .

So normally people has a notion that whatever the have invested in their whole life they can take benefit of them at any time but its not true in the case of NPS .

Investors have to keep aside at least 40% percent of the whole amount to receive a regular pension and exempt if it is using to buy a annuity. And rest of the 60% .


Now let’s talk about the tax benefits which can be claim by the users of NPS , because everybody wants to know about the tax benefits so that they could save their fund and use them appropriately .these are the tax benefit which is only provided to NPS investors. Every investor can took total deduction of up to 2lakh which is divided between two section and that is 1.5lakh of deduction under 80C and 50000 of deduction under 80CCD (1B) in the account of NPS tier-1 and in the account of NPS tier-2 is 1.5lakh for government employee and for other employee is nothing .

And the tax benefit 80CCD(2) has made just for salaried person or who get monthly salary from somewhere . Private sector employee can take 10% of their salary tax deduction under this section and government employee can take 14%.

There is one more thing to remind is, a self employed individual can’t avail all these tax benefits.

Now let’s try to understand the whole tax benefit scenario by an example of a employee who are salaried under a private sector.

Basic salary = 5lakh

Deduction under 80C = 1.5lakh

Deduction under 80CCD (1B) = 50000

Deduction under 80CCD (2 ) = 50000

total amount of deduction which

can be claim by the employee 2.5lakh

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