- 18 to 85Age to join
- ₹1,000Minimum a year (Tier I)
- Up to 80%Lump sum at exit
- ₹50KExtra tax deductionOld regime
What is the National Pension System (NPS)?
The National Pension System (NPS) is a retirement savings scheme. It is regulated by PFRDA (Pension Fund Regulatory and Development Authority). It started for central government staff in 2004, and was opened to all citizens in 2009.
You pay money into your own pension account. A pension fund invests it in shares, company bonds and government bonds. The value of your account goes up and down with the markets. When you exit, you take part of the money as cash and use the rest to buy an annuity, which is a monthly pension from an insurance company.
- Step 1Save while you workAny amount, at least ₹1,000 a year.
- Step 2Money is investedIn shares and bonds, by a pension fund you choose.
- Step 3Take a lump sumUp to 80% at 60.
- Step 4Get a pensionAt least 20% buys a monthly pension.
Example: Priya, 30. She puts ₹10,000 a month into NPS until 60. If her money earns 10% a year (an assumption; NPS returns are not fixed), and she takes the largest lump sum allowed and buys an annuity at 6% with the rest:
- She pays in 30 years
- ₹36 L
- Corpus at 60
- ₹2.28 Cr
- Pension a month
- ₹22,793
NPS returns: market-linked, with no fixed rate
NPS does not pay a fixed interest rate. Your return depends on where your money is invested and on how the markets do. Shares can grow more over long periods, but they can also fall. Bonds usually move less.
The table shows what monthly saving could grow to at 60 at three assumed returns. These are examples, not promises.
| You save | You pay in | At 8% | At 10% | At 12% |
|---|---|---|---|---|
| ₹5,000 a month for 20 years | ₹12,00,000 | ₹29.65 L | ₹38.28 L | ₹49.96 L |
| ₹5,000 a month for 30 years | ₹18,00,000 | ₹75.01 L | ₹1.14 Cr | ₹1.76 Cr |
| ₹10,000 a month for 20 years | ₹24,00,000 | ₹59.29 L | ₹76.57 L | ₹99.91 L |
| ₹10,000 a month for 30 years | ₹36,00,000 | ₹1.5 Cr | ₹2.28 Cr | ₹3.53 Cr |
| ₹20,000 a month for 20 years | ₹48,00,000 | ₹1.19 Cr | ₹1.53 Cr | ₹2 Cr |
| ₹20,000 a month for 30 years | ₹72,00,000 | ₹3 Cr | ₹4.56 Cr | ₹7.06 Cr |
Try your own amount and return on the NPS calculator.
NPS eligibility: who can join?
- Yes: Indian citizens aged 18 to 85, resident or non-resident (NRI)
- Yes: Overseas Citizens of India (OCI)
- Yes: Salaried people, the self-employed, housewives and students
- Yes: Employees through their employer (Corporate Model), if the employer offers it
- Yes: Children under 18, through NPS Vatsalya opened by a parent
- No: Persons of Indian Origin (PIO)
- No: HUFs (Hindu Undivided Families)
- No: A joint account, or an account for someone else
- No: NRIs and OCIs cannot open Tier II
Age limit: PFRDA raised the age to join and to stay in NPS to 85 in the exit rules notified on 12 December 2025. Earlier, you could join only up to 70.
Central government staff: those who joined government service from 2004 are in NPS. From 1 April 2025, they could choose the Unified Pension Scheme (UPS) instead, which gives an assured pension. The last date for existing staff to choose UPS was 30 November 2025. Staff who did not choose stay in NPS. Government subscribers also follow some different exit rules.
NPS Tier I and Tier II accounts
| Tier I | Tier II | |
|---|---|---|
| What it is | The main pension account | An optional savings account |
| Who can open | Everyone who joins NPS | Only with an active Tier I, not for NRIs and OCIs |
| Minimum to open | ₹500 | ₹1,000 |
| Minimum after that | ₹1,000 a year | ₹250 a payment, no yearly minimum |
| Withdrawals | Only under the exit and partial withdrawal rules | Any time |
| Tax benefit | Yes | No |
If you do not pay the ₹1,000 minimum in a financial year, your Tier I account is frozen. You can make it active again by paying the minimum. There is no upper limit on what you can pay into either account.
How to open an NPS account: PRAN, eNPS and documents
When you join, a Central Recordkeeping Agency (CRA) gives you a PRAN, a Permanent Retirement Account Number. It stays the same for life, even if you change job or city.
- Step 1Online with eNPSOn the NPS Trust eNPS platform, with PAN and Aadhaar.
- Step 2At a bank or post officeMost banks and India Post are Points of Presence (PoPs) for NPS.
- Step 3Through your employerIf your company offers NPS under the Corporate Model.
- Step 4Choose your fundPick a pension fund and active or auto choice.
- Step 5Add a nomineeSo your family gets the money easily.
- Step 6Get your PRANPay the first contribution and your account opens.
Documents to keep ready:
| Who | Documents |
|---|---|
| Resident Indian | PAN, proof of address (Aadhaar works for online KYC), a recent photo and bank account details |
| NRI | PAN, Indian passport, Indian address proof, a photo and NRE or NRO bank account proof |
| OCI | PAN, OCI card, foreign address proof, a photo and NRE or NRO bank account proof |
You can pay into NPS at a PoP by cheque or cash, online through eNPS or the NPS app, or through D-Remit, which links your PRAN to a virtual ID for UPI or bank transfer.
NPS fund choices: active choice, auto choice and asset classes
Your money is split across three asset classes. Each pension fund runs a scheme for each class.
- E (equity): shares of companies. Higher growth over time, but the value can fall.
- C (corporate bonds): loans to companies and other debt.
- G (government securities): loans to the central and state governments.
- A (alternative assets): this Tier I option was merged into Schemes C and E under a PFRDA decision of 13 December 2025.
| Option | How it works |
|---|---|
| Active choice | You decide the mix yourself: equity up to 75%, corporate bonds and government securities up to 100%. |
| Auto choice: LC75 (high) | 75% in equity up to age 35, falling each year to 15% from age 55. |
| Auto choice: LC50 (moderate) | 50% in equity up to age 35, falling each year to 10% from age 55. |
| Auto choice: LC25 (low) | 25% in equity up to age 35, falling each year to 5% from age 55. |
| Multiple Scheme Framework (MSF) | From 1 October 2025, for non-government subscribers. Pension funds offer their own schemes, with a high-risk option of up to 100% equity. You can switch out of an MSF scheme only after 15 years, and charges are capped at 0.3% a year. |
- Pension funds: several fund managers are registered with PFRDA. You choose one, and can change it once a year.
- Changing your mix: you can change your investment option or asset mix up to 4 times a year.
- In auto choice, the equity share comes down as you get older, so less of your money is in shares near retirement.
NPS partial withdrawal rules
While you are in NPS, you can take out part of your money for set reasons. This is called a partial withdrawal. The rules below are from the amendment of December 2025.
- How much: up to 25% of your own contributions. Returns and your employer's contributions are not counted.
- How often before 60: up to 4 times, with at least 4 years between two withdrawals.
- After 60, if you stay in NPS: no limit on the number, but at least 3 years between two withdrawals.
- Reasons allowed: higher education or marriage of your children; buying or building your first house (only once, and only if you do not already own one, other than ancestral property); medical treatment or hospital care for you, your spouse, children or parents; and repaying a loan taken against your NPS account.
- Loan against NPS: a regulated lender can mark a lien on up to 25% of your own contribution, under PFRDA guidelines.
- Tier II: these limits do not apply. You can withdraw from Tier II at any time.
NPS exit rules at 60: the 80:20 split
In the All Citizen Model, a normal exit is at 60, or after 15 years in NPS, whichever comes first. In the Corporate Model, it is at retirement from your job. For both, under the PFRDA (Exits and Withdrawals under the NPS) Amendment Regulations, 2025, notified on 12 December 2025:
| Corpus at exit | What you can do |
|---|---|
| Up to ₹8 L | Take all of it as a lump sum or in instalments, or up to 80% lump sum with the rest as an annuity |
| ₹8 L to ₹12 L | Up to ₹6 L lump sum with the rest as an annuity or as instalments over at least 6 years, or up to 80% lump sum with the rest as an annuity |
| Above ₹12 L | Up to 80% lump sum; at least 20% buys an annuity |
Before this change, the split was 60% lump sum and 40% annuity. Government employees still follow the 60:40 split. The table below shows the largest lump sum on a few corpus sizes, with an annuity at an assumed 6% a year:
| Corpus | Lump sum | Tax-free part | Annuity | Pension a month |
|---|---|---|---|---|
| ₹7 L | ₹5.6 L | ₹4.2 L | ₹1.4 L | ₹700 |
| ₹10 L | ₹8 L | ₹6 L | ₹2 L | ₹1,000 |
| ₹25 L | ₹20 L | ₹15 L | ₹5 L | ₹2,500 |
| ₹2.28 Cr | ₹1.82 Cr | ₹1.37 Cr | ₹45.59 L | ₹22,793 |
- Annuity: you buy it from an insurance company empanelled with PFRDA. The rate depends on the insurer, your age and the type of annuity, so the pension above is only an example.
- Stay invested: you do not have to exit at 60. You can keep your account, keep paying in, or delay the lump sum and annuity, up to age 85. Since December 2025, you no longer need to tell the CRA 15 days in advance.
- Joined after 60: you can exit at any time. A corpus up to ₹12 L can be taken in full; above that, up to 80% lump sum.
NPS premature exit: leaving before 60
The old 5-year lock-in was removed in December 2025, so you can leave NPS at any time. But if you leave before 15 years and before 60, it is a premature exit and most of the money must buy an annuity.
Example: Arjun, 42. He has ₹20 L in NPS after 10 years and wants to leave. As this is a premature exit, he can take only 20% in cash. The rest buys an annuity, here at an assumed 6%.
- Lump sum
- ₹4,00,000
- Goes to annuity
- ₹16,00,000
- Pension a month
- ₹8,000
Death of the NPS subscriber and nominee rules
- Step 1Add nomineesYou can name one or more nominees and change them later online.
- Step 2Death before exitThe nominee or legal heir gets the whole corpus as a lump sum, or can choose an annuity or instalments.
- Step 3Death after annuityWhat the family gets depends on the annuity type chosen, such as a pension for the spouse or return of the purchase price.
- Step 4Government staffDifferent rules apply on death in service; check with your nodal office.
The amount a nominee gets from the NPS account on the subscriber's death is not taxed as the nominee's income.
NPS tax benefits under the old and new tax regime
- ₹1.5 LOwn contributionOld regime, Section 123 (earlier 80CCD(1))
- + ₹50KExtra deductionOld regime, Section 124 (earlier 80CCD(1B))
- 14% of salaryEmployer contributionNew regime too, Section 124 (earlier 80CCD(2))
- 60%Of corpus tax-free at exit
- Your own contribution: in the old regime, it counts within the ₹1,50,000 limit of Section 123 of the Income-tax Act, 2025 (earlier 80CCD(1) with 80C). The limit is 10% of salary (basic plus DA) for employees, or 20% of gross income for the self-employed.
- Extra ₹50,000: in the old regime, you can claim another ₹50,000 for NPS Tier I under Section 124 (earlier 80CCD(1B)), over the ₹1.5 L limit. Payments to a child's NPS Vatsalya account count within the same ₹50,000. The same rupee cannot be claimed twice.
- Employer's contribution: deductible in both regimes under Section 124 (earlier 80CCD(2)). In the new regime, up to 14% of basic plus DA. In the old regime, up to 10% for private employers and 14% for government employers.
- At exit: 60% of the corpus is tax-free. A lump sum above 60% is taxed at your slab rate. The money used to buy the annuity is not taxed, but the pension you get from it is taxed every year as income.
- Partial withdrawal: a partial withdrawal within PFRDA's limits is tax-free (earlier Section 10(12B)).
- Tier II: no tax benefit on what you pay in.
Example: Priya's exit at 60. She takes the largest lump sum, 80% of ₹2.28 Cr. The first 60% of the corpus is tax-free; the rest of the lump sum is added to her income for that year.
- Lump sum
- ₹1,82,34,603
- Tax-free
- ₹1,36,75,952
- Taxed at slab rate
- ₹45,58,651
NPS Vatsalya: NPS for children
NPS Vatsalya is an NPS account for a child under 18. It was launched on 18 September 2024. Its current rules are the NPS Vatsalya Scheme Guidelines 2025, issued on 7 January 2026 and in force from 23 February 2026.
- Step 1Who can openA parent or legal guardian, for any Indian citizen child under 18. NRI and OCI children can join too.
- Step 2How muchAt least ₹250 to open and ₹250 a year. No upper limit. Relatives can also pay in.
- Step 3Where it goesThe pension fund invests 50% to 75% in equity, the rest in bonds.
- Step 4DocumentsChild's birth proof, and the guardian's KYC and PAN (or Form 60).
- Partial withdrawal: after 3 years, up to 25% of contributions, for the child's education, treatment of specified illness or disability of more than 75%. Up to 2 times before 18, and 2 more between 18 and 21.
- At 18: the child completes fresh KYC and then chooses: move the money to a normal NPS account, or exit with up to 80% as a lump sum and the rest as an annuity. If the corpus is below ₹8 L, all of it can be taken.
- No choice by 21: the account moves to a high-equity scheme of the same pension fund under the Multiple Scheme Framework, and the normal NPS exit rules then apply.
- If the child dies: the whole amount is paid to the guardian, nominee or legal heir.
- Tax: in the old regime, a parent can claim payments within the ₹50,000 extra NPS deduction (Section 124).
NPS: strengths and limits
- Yes: Regulated by PFRDA, with low fund charges
- Yes: Choice of pension fund and of how much goes into shares
- Yes: Extra tax deduction in the old regime, and employer deduction in the new regime
- Yes: Up to 80% can be taken as a lump sum at 60
- Yes: One PRAN for life, across jobs and cities
- No: No fixed or guaranteed return
- No: At least 20% must buy an annuity on most exits
- No: Only 60% of the corpus is tax-free at exit
- No: Annuity pension is taxed and usually does not rise with prices
- No: Early exit sends most of the money to an annuity
NPS vs EPF vs PPF vs Atal Pension Yojana
| NPS | EPF | PPF | APY | |
|---|---|---|---|---|
| Who can join | Citizens and OCIs, 18 to 85 | Salaried staff of covered employers | Resident Indians | 18 to 40, not tax payers |
| Return | Market-linked | 8.25% declared for 2025-26 | 7.1%, set every quarter | Fixed pension |
| Payment | Your choice, ₹1,000 a year minimum | 12% of basic + DA, matched by employer | ₹500 to ₹1.5 L a year | Fixed by age and pension |
| Money locked until | 60, or 15 years | Retirement or leaving work | 15 years | 60 |
| At the end | Up to 80% cash, rest pension | Full amount in cash | Full amount in cash | ₹1,000 to ₹5,000 a month |
| Guarantee | No | Rate declared each year | Government-backed | Pension guaranteed by government |
| Tax at the end | 60% tax-free, pension taxed | Tax-free after 5 years of service | Tax-free | Pension taxed |
Read more on the Employees' Provident Fund (EPF) and Atal Pension Yojana pages, or compare numbers on the EPF calculator and PPF calculator.
Frequently asked questions
What is the National Pension System (NPS)?
NPS is a retirement savings scheme of the Government of India, run by PFRDA, the pension regulator. You put money into your own pension account. Pension funds invest it in shares, company bonds and government bonds. When you exit, you can take up to 80% as a lump sum and use the rest to buy a monthly pension (annuity).
What is the age limit to join NPS?
Any Indian citizen aged 18 to 85 can join under the All Citizen Model. PFRDA raised the age from 70 to 85 in the exit rules amended in December 2025.
Can NRIs and OCIs open an NPS account?
Yes. Non-resident Indians (NRIs) and Overseas Citizens of India (OCIs) can open an NPS Tier I account, using an NRE or NRO bank account. They cannot open a Tier II account. Persons of Indian Origin (PIOs) and HUFs cannot join.
What is the minimum contribution in NPS?
For Tier I, ₹500 when you open the account and at least ₹1,000 in each financial year. If you miss the yearly minimum, the account is frozen until you pay it. Tier II needs ₹1,000 to open and ₹250 for each later payment. There is no upper limit.
What is the difference between NPS Tier I and Tier II?
Tier I is the main pension account. It gives tax benefits, and withdrawals follow the exit rules. Tier II is an optional savings account linked to Tier I. You can take money out of Tier II at any time, but it gives no tax benefit.
How can I open an NPS account online?
Go to the eNPS platform of NPS Trust, or to the website or app of a bank that offers NPS. Enter your PAN and verify with Aadhaar, choose your pension fund and investment option, add a nominee and pay the first contribution. You get your PRAN (Permanent Retirement Account Number) once the account is opened.
How much NPS can I withdraw at 60?
Under PFRDA's exit rules amended in December 2025, non-government subscribers can take up to 80% as a lump sum and must buy an annuity with at least 20%. If the corpus is up to ₹8 L, all of it can be taken. Earlier, the split was 60:40.
Is the NPS lump sum tax-free?
Only 60% of the corpus is tax-free at exit. If you take more than 60% as a lump sum, the extra part is taxed at your slab rate. The monthly pension from the annuity is also taxed as income.
Can I withdraw from NPS before 60?
Yes, in two ways. A partial withdrawal lets you take up to 25% of your own contributions for set reasons such as children's education or marriage, a first house or medical treatment, up to 4 times before 60. Or you can leave NPS early: then up to 20% is paid as a lump sum and at least 80% buys an annuity, unless the corpus is ₹5 L or less.
What return does NPS give?
NPS has no fixed or promised return. The return depends on how the pension fund invests your money in shares and bonds, and on the markets. Past returns are published by the pension funds and NPS Trust, but they do not tell you what you will get in future.
Does NPS give tax benefit in the new tax regime?
Only for the employer's contribution. Under the new regime, your employer's contribution of up to 14% of basic pay plus DA is deductible (Section 124 of the Income-tax Act, 2025, earlier 80CCD(2)). Deductions for your own contribution, including the extra ₹50,000, are only in the old regime.
What is NPS Vatsalya?
NPS Vatsalya is an NPS account for a child under 18, opened and run by a parent or guardian. The minimum is ₹250 a year. At 18, the child can move the money into a normal NPS account or exit.