NPS Overview
A clear, quick guide to the National Pension System — what it is, why it helps, the accounts available, how to begin, and what to keep in mind.
What is the National Pension System?
NPS is a voluntary, long-term retirement savings scheme regulated by the PFRDA. You contribute during your working years into a personal pension account; the money is invested in market-linked assets and, at retirement, gives you a lump sum plus a regular pension. It is a defined-contribution system — your final benefit grows with your contributions and the returns they earn, rather than a fixed promise.
₹15 lakh crore+
NPS assets under management.
2 crore+
NPS subscribers.
10
Pension fund managers.
Up to 75%
Maximum equity allocation.
Read more — how NPS came about and how it works
Before 2004, retirement security in India rested on family support, employer provident funds and defined-benefit government pensions, where the payout was fixed and the fiscal burden sat entirely with the state. Rising costs and thin coverage led to the OASIS reforms and a shift to a defined-contribution model — where your benefit is built from your own contributions and the returns they earn.
How the system took shape
- Introduced on 1 January 2004 for new central-government recruits
- Opened to all citizens voluntarily from 2009
- Extended to the Corporate model for employers
- NPS Vatsalya added for minors
- Regulator PFRDA set up in 2003; statutory in 2013
- Runs on a low-cost, unbundled architecture
Benefits of investing in NPS
A retirement product built for growth, discipline and tax efficiency. Tap any card for more.
Read more — the tax benefits, in detail
NPS is one of the few products that stacks three separate income-tax deductions, which is a large part of why it is so tax-efficient over a career.
Deductions you can claim
- 80CCD(1) — your own contribution, within the overall ₹1.5 lakh 80C limit
- 80CCD(1B) — an additional ₹50,000, over and above 80C
- 80CCD(2) — employer contribution, up to 10% (private) / 14% (govt) of salary
- 80CCD(2) stays available even under the new tax regime
The lump sum at exit is largely tax-favoured; only the annuity pension is taxed as income in the year received. Always confirm against the prevailing provisions.
Tier I and Tier II
Every subscriber starts with a Tier I account and can optionally add a flexible Tier II.
Tier I — the retirement account
The primary account where your retirement savings build up. All tax and pension benefits are linked to it.
- Required to join NPS
- Tax deductions under 80CCD(1), 80CCD(1B) & 80CCD(2)
- Withdrawals restricted until retirement
- At exit: lump sum + annuity pension
Tier II — the flexible add-on
A voluntary investment account with the same low-cost, professionally managed funds — and no lock-in.
- Needs an active Tier I account
- Withdraw any time, no lock-in
- Minimum ₹250 per contribution
- Generally no separate tax benefit
Which one? Use Tier I for retirement and tax savings; add Tier II only if you want a flexible, withdraw-anytime pot alongside it. NPS is also offered through All-Citizen, Corporate and Government models — plus NPS Vatsalya for minors.
Read more — Tier I vs Tier II compared
Every subscriber holds a Tier I retirement account; Tier II is an optional, no-lock-in add-on that runs on the same low-cost funds but works like a flexible investment wallet.
At a glance
- Tier I — opens from ₹500, minimum ₹1,000 a year to stay active
- Tier II — needs an active Tier I first
- Tier II — minimum ₹250 per contribution, no minimum balance
- Tier I — withdrawals restricted until exit
- Tier II — withdraw any time, no lock-in
- Tax breaks are linked to Tier I only
How to invest in NPS
Five simple steps from eligibility to your first contribution. Tap any step for detail.
Read more — eNPS, Points of Presence and what you need
You can open NPS entirely online through eNPS using Aadhaar or PAN, or offline at a Point of Presence (a bank or authorised agent). Either way you receive a lifelong PRAN.
Keep handy for KYC
- Proof of identity and address
- PAN card
- An active bank account
- A recent photograph
- Nominee details
- Mobile & email for the login
Contributions can be made monthly, annually or ad-hoc, and you can switch your fund manager or investment choice online later.
Tax treatment under NPS
Which NPS deductions you can claim depends on the regime you choose. The new regime is the default from FY 2025–26 — here is what survives in each.
Educational summary for FY 2025–26, not tax advice. Deduction limits and regime rules can change with each Union Budget — confirm the current position with a qualified tax adviser before you act.
Limitations to keep in mind
NPS rewards patience — tap any card to understand the trade-off.
Contribution, withdrawal and tax rules follow the prevailing PFRDA regulations and Income-tax provisions, and should be verified before investing.
Read more — the liquidity and annuity trade-off
The lock-in is real, but NPS builds in a few escape valves — knowing how they work lets you plan around them rather than be caught out.
How access actually works
- Partial withdrawal: after three years you can take up to 25% of your own contributions, for set reasons such as a child’s education or marriage, a home, or serious illness
- At 60: up to 60% of the corpus can be taken as a tax-free lump sum, and the rest buys an annuity that pays your pension
- Before 60: a larger share must go to the annuity, leaving a smaller lump sum — a very small corpus can be withdrawn in full, per the prevailing PFRDA rules
- You need not take the lump sum in one go — it can be drawn in phases up to age 75
Common questions
Tap a question to read more.
Is NPS a guaranteed pension or a market-linked product?
NPS is market-linked, not guaranteed. Your final corpus and pension depend on how much you contribute, the returns your chosen funds earn, and the annuity you buy at exit — so the outcome can’t be fixed in advance, unlike the old defined-benefit pension where the amount was assured.
How is NPS different from EPF, PPF or mutual funds?
EPF and PPF pay fixed, government-set returns; mutual funds are market-linked but not retirement-locked. NPS sits in between — market-linked growth like a fund, but built for retirement, with extra tax breaks, among the lowest costs of any product, and a built-in pension at the end.
What tax benefits does NPS offer?
Deduction under Section 80CCD(1) (within the overall 80C limit), an additional ₹50,000 under 80CCD(1B), and employer contributions under 80CCD(2) — the last available even under the new tax regime, subject to prescribed limits.
What returns can I expect?
There is no promised rate. Returns vary with your asset mix and market cycles — a higher equity allocation has historically meant higher long-term growth, with more short-term ups and downs. NPS is best judged over decades, not months.
What happens to my NPS if I change jobs or cities?
Nothing changes — your PRAN is portable. The same account continues across employers, professions and locations for your entire working life, so you never have to restart.
Start building your retirement corpus
Open an NPS account online in minutes, or explore which route fits you best.