NPS for High Earners: Pros/Cons, EEE Nuances, Withdrawal Rules

NPS is a low‑cost way to lock a part of your debt allocation and save extra tax. It is not a universal fit.

Why High Earners Consider NPS

• Extra ₹50,000 deduction under 80CCD(1B) after maxing 80C.
• Employer contribution under 80CCD(2) can be very efficient within limits.
• Low expense ratio across equity and debt choices.

Tradeoffs You Must Accept

• Partial annuitization at exit. 40% annuity is common at retirement. Annuity income is taxable.
• Lock in till 60 for Tier I. Tier II has liquidity but no tax break.
• Limited fund choice and active management.

Practical Setup

• Treat NPS as part of your debt sleeve. Keep equity inside NPS modest and run your equity strategy outside.
• Use auto‑choice lifecycle if you prefer set‑and‑forget. Manual choice requires periodic review.

Tools

• NPS Calculator: Model tax savings and corpus outcomes.