NPS vs APY – The National Pension Scheme (NPS) and Atal Pension Yojana (APY) are two retirement-focused investment plans regulated by the Pension Fund Regulatory and Development Authority (PFRDA). While both schemes aim to provide financial security during retirement, they cater to different groups of investors and have distinct features.
This guide will provide an in-depth comparison of NPS vs APY, covering their definitions, differences, similarities, and other key aspects to help you make an informed decision.
The Atal Pension Yojana (APY) is a government-backed pension scheme designed for the unorganized sector, ensuring fixed pensions ranging from ₹1,000 to ₹5,000 per month after retirement. Key features include:
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The National Pension Scheme (NPS) is a voluntary retirement savings scheme designed to provide market-linked returns. It is open to all Indian citizens aged 18-70 years and is widely used by salaried employees and self-employed individuals. Key features include:
| Feature | National Pension Scheme (NPS) | Atal Pension Yojana (APY) |
| Eligibility | Indian citizens aged 18-70 years | Indian citizens aged 18-40 years |
| Investment Returns | Market-linked | Fixed pension amount |
| Pension Amount | Variable based on investment performance | Predefined (₹1,000 to ₹5,000) |
| Government Contribution | No contribution | Government co-contribution available for eligible subscribers |
| Withdrawal | 60% corpus tax-free, 40% used for annuity purchase | Fixed pension until death; corpus transferred to spouse/nominee |
| Flexibility | High – choice of funds and fund managers | Low – fixed contributions and pension amounts |
| Tax Benefits | Up to ₹2,00,000 deduction under Section 80C and 80CCD | Limited tax benefits under Section 80CCD(1B) |
Despite their differences, NPS and APY share some commonalities:
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The Public Provident Fund (PPF) is another popular retirement investment scheme in India. Here’s how it compares with NPS:
| Feature | NPS | PPF |
| Returns | Market-linked | Fixed (set by the government) |
| Tax Benefits | Up to ₹2,00,000 deduction | Interest is tax-free |
| Liquidity | Partial withdrawal allowed after 3 years | Partial withdrawal allowed after 7 years |
| Lock-in Period | Till retirement (60 years) | 15 years (extendable) |
| Withdrawal | 60% tax-free, 40% annuity purchase | Full amount tax-free after maturity |
Both NPS and APY serve distinct purposes. While APY is best suited for individuals in the unorganized sector who want a guaranteed pension, NPS is ideal for salaried individuals and professionals looking for a market-linked retirement corpus.
When choosing between NPS vs APY, consider your financial goals, risk appetite, and retirement needs. If you seek flexibility and high returns, NPS is a better option. However, if you prefer a fixed pension with lower risk, APY is more suitable.
Calculate your pension here at NPS Calculator | APY Calculator
Yes, an individual can invest in both NPS and APY simultaneously.
NPS: ₹500 for Tier-I and ₹250 for Tier-II. APY: Contribution varies based on the chosen pension amount.
NRIs can invest in NPS but are not eligible for APY.
NPS offers better tax benefits with deductions under Sections 80C and 80CCD(1B), whereas APY offers limited tax deductions.
Premature exit from APY is only allowed in cases of death or terminal illness.
In the event of the subscriber’s death, the pension is transferred to the spouse, and upon their death, the corpus is given to the nominee.
Yes, partial withdrawals are allowed under specific conditions, such as medical emergencies or higher education.
NPS offers higher returns but carries market risk, while PPF provides stable and tax-free returns.
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