• In essence, NPS is an annuity product designed to act as a retirement fund once a person leaves the workforce.
• Individuals can contribute to their NPS accounts while still working and withdraw once they turn 60.
• Interest rate - 9-12% (varies based on the stock market, so we can assume 8.5% to be safe).
• For comparison, In PPF we get a fixed interest rate of 7.1% (Q4 of FY 2023-24) (guarantied by Govt and varies every Financial year)

Tax on contributions

• No tax up to 1,50,000 under 80C
• plus no tax up to extra 50,000 under 80CCD

How much can you take out and when ?

• you can take out money only after 60 years of age.
• When the account holder turns 60, 60% of the fund value may be withdrawn, with the remaining funds being utilized to buy an annuity. (You won’t get 100% of the amount). 40% is used to create a annuity, i.e. who will be given a monthly amount based on your 40% amount as a income. (Something like having a fixed deposit and getting interest on it every month)
• you can take out up to 25% after 3 years for emergencies.

Tax on the Final amount when you withdraw

• No tax on 60% of amount that you withdraw at 60.

<aside> 💡 Reference : https://cleartax.in/s/nps-tier-1-vs-nps-tier-2

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