What the latest NPS rules mean for salaried professionals

We sat down with Sanjiv to collect the NPS questions our salaried clients asked most this year. His answers are edited for length.

I moved to the new tax regime. Is NPS still worth it?

"Your own contribution under 80CCD(1B) no longer saves tax in the new regime. But the employer contribution under 80CCD(2) still does, up to 14% of basic plus DA. For many people that is the single biggest deduction left. If your company offers it, take it."

How much does that actually save?

"On a basic of ₹1.5 lakh a month, 14% is ₹21,000 a month, or ₹2.52 lakh a year. At a 30% slab, that is over ₹75,000 in tax saved every year. Restructuring your salary to include it costs nothing in take-home before tax."

Can I take money out before 60?

"Partial withdrawals are allowed for specific reasons, such as a child's education or marriage, buying a first home, or a serious illness, subject to limits on how often and how much. NPS is built to be hard to touch. For a retirement account, that is a feature."

What happens at 60?

"A part of the corpus can be taken as a lump sum, tax-free within the current limits. The rest must buy an annuity. Annuity income is taxed as salary, so we plan the split around your other retirement income. We compare annuity quotes across insurers for every client at this stage."

Active or auto choice?

"Under 40, most clients take active choice with a high equity share. As retirement nears, we shift it down every year. Auto choice does a version of this for you, which suits people who will not review it."

So should a salaried professional have NPS?

"If your employer offers the 80CCD(2) contribution: almost always yes. If not, and you are in the new regime, NPS is one good option among several. It is not a must. We would look at it next to your EPF, PPF and mutual funds before deciding."

If you want us to check how NPS fits your salary structure, send us your latest payslip and we will reply with the numbers.