NPS Calculator: With retirement, your regular income from employment comes to an end, and if you don’t have any other source of income during your later years, you might find yourself in financial difficulties. In 2009, to help citizens avoid such a problem, the government extended the facility of the National Pension System (NPS), commonly known as the National Pension Scheme, to employees working in the private sector and unorganised jobs. The NPS was originally started in 2004 for government employees, who were earlier covered under the Old Pension Scheme (OPS).
NPS gives a steady pension, ensuring financial independence and security for employees during their golden years. For this, employees need to contribute on a monthly or yearly basis throughout their working years. The higher their contributions and the earlier they start, the larger their retirement corpus grows.
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NPS operates on a defined contribution model, meaning that retirement benefits depend on the total contributions made and the returns generated from investments. Unlike traditional pension systems with fixed payouts, NPS empowers individuals to take control of their retirement savings and grow their investments.
You can open two types of NPS accounts: Tier I and Tier II. A Tier II account is allowed to open only when you have a Tier I account. The two accounts differ primarily in terms of tax benefits and withdrawal rules.
When comparing the two types of NPS accounts, the Tier-I account has a lock-in period that lasts until the accountholder’s retirement, whereas the Tier-II account offers flexibility with no lock-in period, allowing withdrawals at any time.
For Tier-I accounts,
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