Question 1

How much tax can I save with NPS every year in India?

Accepted Answer

You can save tax under three sections: Section 80CCD(1) up to ₹1.5 Lakhs (within 80C limit), Section 80CCD(1B) up to an exclusive additional ₹50,000, and Section 80CCD(2) up to 10% basic salary for corporate employer contributions (14% for Central Govt employees).

Question 2

Is the 60% lump sum at age 60 completely tax-free?

Accepted Answer

Yes. Under Section 10(44) of the Income Tax Act, up to 60% of the total accumulated NPS corpus withdrawn upon reaching 60 years of age is 100% tax-free. The remaining minimum 40% is used to purchase a monthly pension plan (annuity).

Question 3

What is Corporate NPS under Section 80CCD(2)?

Accepted Answer

Corporate NPS allows employers to contribute up to 10% of an employee's Basic Salary + DA into their NPS Tier 1 account. This employer contribution is 100% tax-exempt for the employee without any upper cap from the ₹1.5 Lakh 80C basket.

Question 4

Can I withdraw money from NPS before age 60?

Accepted Answer

Partial withdrawals up to 25% of your personal contributions are allowed after 3 years for specific reasons (education, marriage, house purchase, critical illness). For full premature exit before 60, mandatory PFRDA rules state that 80% must purchase an annuity pension and 20% can be taken as lump sum.

National Pension System (NPS) Decision Platform