The National Pension System (NPS) is a voluntary, market linked retirement savings scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It was opened to all citizens in 2009.
Who can join
Indian citizens aged 18 to 70, including NRIs, can open an account. You get a Permanent Retirement Account Number (PRAN).
Tier 1 and Tier 2
- Tier 1: the main pension account. Withdrawals are restricted until 60, and tax benefits apply.
- Tier 2: an optional voluntary account with free withdrawals, generally without tax benefits (except a special case for government employees).
Investment choices
Your money is managed by PFRDA registered pension fund managers across equity, corporate bonds, government securities and alternative assets. You can choose:
- Active choice: decide the mix yourself, within equity limits.
- Auto choice: the mix becomes more conservative as you age.
Also Read: Sukanya Samriddhi Account: Rules, Deposit Limits, Tax Benefits and When the Money Can Be Withdrawn | PPF Account Rules: Deposit Limit, 15 Year Lock In, Loan, Partial Withdrawal and Extension Explained
Tax benefits
- Under the old regime, contributions qualify for deduction under Section 80CCD(1) within the Rs 1.5 lakh limit of 80C, and an extra Rs 50,000 under 80CCD(1B).
- Employer contributions qualify under 80CCD(2), which is also available in the new tax regime within the set limit.
Rules at 60
At 60, you can withdraw up to 60 percent of the corpus as a tax free lump sum, and must use at least 40 percent to buy an annuity that gives a monthly pension. If the corpus is below a threshold set by PFRDA, full withdrawal may be allowed. PFRDA has revised exit rules over time, so check the latest regulations.
Partial withdrawal
After a minimum period, partial withdrawal of up to 25 percent of your own contributions is allowed for specific needs, such as children’s education or marriage, buying a house or treatment of serious illness.
How to open
Open online through eNPS on the Protean or KFintech CRA websites, or through banks and post offices that act as points of presence.
Unified Pension Scheme
Central government employees covered under NPS were given an option to move to the Unified Pension Scheme (UPS) from April 2025. This does not affect private sector subscribers.
Bottom line
NPS is a low cost way to build retirement savings with extra tax benefits. Choose your asset mix carefully and stay invested for the long term.
Source / स्रोत: PFRDA, NPS Trust, Protean CRA
