National Pension System (NPS)

NPS at a glance

Worked example: ₹5,000 a month from 30

Investing ₹5,000 a month from age 30 to 60 (₹18,00,000 in all) at an assumed 10% a year builds a corpus of about ₹1.04 Cr. Assuming an annuity rate of 6%:

• The minimum 20% in an annuity: a lump sum of ₹83,17,171 and a pension of about ₹10,396 a month.
• 40% in an annuity (the old minimum): ₹62,37,878 as a lump sum and about ₹20,793 a month.

10% is an assumption, not a promise; equity-heavy NPS funds have done better over long periods and bond funds less. Change the figures in the NPS calculator.

Exit and withdrawal rules (from December 2025)

PFRDA rewrote the exit rules for non-government subscribers in December 2025:

• Normal exit is at 60, at retirement, or after 15 years in NPS, whichever comes first. Up to 80% can be taken as a lump sum and at least 20% must buy an annuity. A corpus of ₹8 Lakh or less can be withdrawn in full; between ₹8 lakh and ₹12 lakh, up to ₹6 lakh can be taken at once and the rest as regular payouts.
• Early exit before that: at least 80% must buy an annuity, unless the corpus is ₹5 lakh or less.
• Deferring: you can leave the money invested, and put off the lump sum or annuity, up to age 85.
• Partial withdrawals are allowed for set needs such as education, marriage, a house or medical treatment, up to 25% of your own contributions; a loan against up to 25% of your own contributions is also allowed.

Central and state government employees still have to buy an annuity with at least 40% of the corpus.

NPS tax benefits

• Old regime: your own contribution counts under Section 80C within ₹1.5 lakh, and up to ₹50,000 more is deductible under 80CCD(1B), so a taxpayer in the 30% bracket saves about ₹15,600 a year on that extra amount alone.
• Employer contribution: deductible up to 14% of basic pay and DA under the new regime, and 10% under the old regime for private-sector employees, within an overall ₹7.5 lakh a year limit on employer contributions to NPS, EPF and superannuation funds.
• At exit: up to 60% of the corpus as a lump sum is tax-free; the pension from the annuity is taxed as income each year.

How to open an NPS account

Open one online at the eNPS sites of Protean or KFintech, or through a bank or a point of presence such as a post office, with your Aadhaar and PAN. You get a 12-digit PRAN (Permanent Retirement Account Number) that stays with you through every job. Check your balance and statement through the CRA site or the NPS app.

You choose a pension fund manager and either your own mix of equity (up to 75%), corporate bonds and government bonds, or an automatic life-cycle mix that moves out of equity as you age. Both can be changed later.

NPS Vatsalya and the Unified Pension Scheme

NPS Vatsalya lets a parent open an NPS account for a child, with ₹1,000 a year or more; it converts to a regular NPS account when the child turns 18.

The Unified Pension Scheme (UPS), in force since 1 April 2025, is an option for central government employees covered by NPS: it guarantees a pension of 50% of the average basic pay of the last 12 months for 25 years of service, with a minimum of ₹10,000 a month after 10 years. It is not open to the public.

NPS compared with the alternatives

• PPF gives a guaranteed, tax-free return and full withdrawal at maturity, but no extra deduction beyond 80C.
• EPF and VPF pay a fixed declared rate and are fully withdrawable at retirement.
• Atal Pension Yojana guarantees a fixed pension of up to ₹5,000 a month, for those who do not pay income tax.

Frequently asked questions

Sources

• PFRDA – National Pension System
• PFRDA (Exits and Withdrawals under NPS) (Amendment) Regulations, 2025
• NPS Trust – scheme returns and fund managers
• Income Tax Department

Last checked on 6 October 2026. Returns are not guaranteed; NPS returns depend on the markets and the fund you choose.