NPS Interest Rates for Tier 1 & Tier 2 Cities

How Are NPS Rates Determined?

 

A question a reader may have is: how can the interest rate for NPS not be fixed? Here’s how!

When a person invests in the National Pension Scheme, there are two options. First, they can invest “Actively” or choose an “Auto” mode of investment. 

Further, in the “Active” investment mode, investors will need to choose the class of investment (Class A, G, C, E), the percentage of their investment in these classes, and the fund manager. 

Whereas, in the “Auto” mode, they can choose from one of 3 investment options based on the risks associated. 

Therefore, NPS interest rates depend on all underlying funds in which they are invested. Since interest rates for different fund houses and asset types are different, interest rates are not fixed. 

Further, any reader may be curious about what is the NPS interest rate for these different investment classes. The table below shows a range of interest rates for 5 and 10 years for the different investment classes in 2021.

Asset Class

5 Years Returns (approximate)

10 Years Returns (approximate)

Class E

13-15%

10-11%

Class C

9-10%

10-10.5%

Class G

10.2-10.8%

9.5-10%

Class A

4%-16% (1 year returns)

4%-16% (1 year returns)

What Are NPS Interest Rates 2020-21?

NPS interest rate 2020-21 for Tier I and Tier II NPS accounts in the different investment classes is summarised below.

Tier I or Tier II NPS Account Type

Investment Class

5 Years Returns from Top Funds

Tier I

Class E, Class C, Class G, Class A

11-15%, 10%, 9-11%, 7-8%

Tier II

Class E , Class C, Class G

9-12%, 9-10%, 9-12%

The table shows an approximate NPS current interest rate for the different investment classes under the Tier I and Tier II accounts.

As can be seen from the rates provided by the top fund houses for each asset class, the NPS interest rate 2021 hovers around the 9-12% mark.

Is NPS Interest Taxable?

What Is The NPS Interest Return Rate for a Tier 1 Account?

 

The NPS interest rate for Tier 1 accounts are given below:

Tier I Accounts

3 Years Returns

5 Years Returns

Range of interest rate for the top funds

11-14%

10-11%

What Is The NPS Interest Return Rate for a Tier 2 Account?

 

For Tier II the interest on NPS is given below:

Tier II Accounts

3 Years Returns

5 Years Returns

Range of interest rate for the top funds

11-14%

8-11%

Does NPS Provide a Fixed Interest Rate?

Frequently Asked Questions