The National Pension Scheme (NPS) is a voluntary, long-term retirement savings initiative regulated by the Pension Fund Regulatory and Development Authority (PFRDA), designed to provide financial security post-retirement for Indian citizens, including residents, non-residents, and Overseas Citizens of India, aged 18 to 70 years. NPS operates as a market-linked, defined contribution system, allowing individuals to systematically accumulate a retirement corpus through regular contributions over their working life.
Account Structure:
NPS features two types of accounts: Tier-I and Tier-II. The Tier-I account is mandatory for retirement savings, with restricted withdrawals until age 60, and requires a minimum annual contribution of ₹1,000. The Tier-II account is optional, offering flexible withdrawals and no annual minimum contribution, but lacks tax benefits for most subscribers.
Investment Options:
Subscribers can choose how their funds are invested by selecting from four asset classes: Equity (E), Corporate Debt (C), Government Bonds (G), and Alternative Investments (A). Asset allocation is customizable, with up to 75% equity exposure in Tier-I and up to 100% in Tier-II accounts. Investors can also select their preferred Pension Fund Manager and switch between managers or asset allocations as needed.
Returns and Benefits:
NPS offers market-linked returns, averaging between 9% and 12% per annum as of 2025, depending on asset class and fund manager performance. The scheme is recognized for its low cost, transparency, portability across jobs and locations, and robust regulatory oversight.  Account management is accessible online, enabling easy contributions, monitoring, and changes.
Tax Advantages:
NPS provides significant tax benefits. Contributions are eligible for deductions under Section 80C (up to ₹1.5 lakh) and an additional ₹50,000 under Section 80CCD(1B), making it a tax-efficient investment for retirement planning.
Withdrawal and Maturity:
At retirement (age 60), subscribers can withdraw up to 60% of the corpus as a lump sum, which is tax-free, while at least 40% must be used to purchase an annuity for regular pension income7. Early and partial withdrawals are permitted under specific circumstances.
Overall, NPS is a flexible, accessible, and cost-effective solution for building a secure retirement corpus, suitable for individuals across employment sectors.