National Pension Scheme (NPS) 2026: Tax Benefits, Eligibility, Withdrawal & How to Open Account

The National Pension System (NPS) is a government-backed retirement savings scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It is designed to help individuals build a retirement corpus through systematic, long-term investments.

Contributions can be made to the Tier I account, which offers tax benefits of up to Rs. 2 lakh under Section 80C of the Income Tax Act, or to both Tier I and Tier II accounts. NPS combines market-linked returns with tax-saving benefits, making it a popular choice for retirement planning.

National Pension Scheme - Overview

Aspect	Details
Eligibility	Indian citizens aged 18 to 70 years can open an NPS account.
Account Types	Tier I (retirement account) and Tier II (voluntary savings account).
Minimum Contribution	Rs. 500 to open Tier I and Rs. 1,000 per year thereafter.
Returns	Market-linked returns with no fixed interest rate.
Tax Benefits	Tax deductions available under Sections 80CCD(1), 80CCD(1B), and 80CCD(2).

What is National Pension Scheme?

The National Pension System (NPS) is a government backed retirement scheme with a focus to help individuals build a pension corpus during their working years. It is open to employees in the government, private, and unorganised sectors. Subscribers can contribute regularly to their NPS account and benefit from market linked returns. 

At the time of retirement, a portion of the accumulated corpus can be withdrawn as a lump sum, while the remaining amount is used to purchase an annuity that provides a regular pension income.

NPS Vatsalya

The NPS Vatsalya scheme allows parents to open and operate an NPS account for their minot children. Contributions to the scheme can be made by parents and guardians regulary until the child turn 18 years of age. Once the child turns 18, the account can be converted to a regular NPS account which can then be managed by the child itself independently. 

Further, the tax benefits available under the National Pension System have also been extended to NPS Vatsalya contributions, making it an attractive long-term savings option for parents.

National Pension Scheme - Interest Rate

As NPS is a scheme where its returns depends on market performance of the fund irrespective of equity allocation, there is no fixed interest rate for this scheme, unlike other savings scheme. The returns depend on various factors like:

• Markets and economic situation
• Equity allocation chosen
• Fund manager chosen
• Duration of the investment

NPS Calculator 2026

National Pension Scheme Eligibility

The NPS is a good scheme for anyone who wants to plan for their retirement early on and has a low-risk appetite. Any person fulfilling the following eligibility criteria can join NPS:

• Should be an Indian citizen (resident or non-resident) or a Non-Resident Indian (NRI).
• Should be aged between 18 – 85 years.
• Should comply with the Know Your Customer (KYC) norms detailed in the application form.
• Should be legally competent to execute a contract as per the Indian Contract Act.
• Overseas citizen of India (OCI), Persons of Indian Origin (PIOs) and Hindu Undivided Families (HUFs) are not eligible to subscribe to NPS.
• NPS is an individual pension account, thus it cannot be opened on behalf of a third person.

Features of National Pension Scheme 

1. Age Limit

• NPS account can be opened by a Indian citizen ( including a Non-Residential Indian) is 18 to 85 years.

2. Returns

• This scheme has been in effect for over a decade, and so far has delivered 11% to 20% annualized returns. 
• Though this scheme does not guarantee a fixed rate of interest, it has earned a better returns than other tax saving investments.

3. Equity Allocation

• Currently, there is a cap in the range of 50% to 75% on equity exposure for the National Pension Scheme. 
• For government employees and senior citizens, this cap is 50%
• There are two options to invest in – auto choice or active choice.
• Auto choice sets your investment risk based on age—older investors get more stable, lower-risk options.
• The active choice allows you to decide on the scheme and to split your investments. 

4. Flexibility

• NPS subscribers can contribute to the NPS fund at any time in a financial year and change the number of subscriptions. 
• They can choose their own investment options.
• You are also allowed the option to change your fund manager if you are not happy with the performance of the fund.
• They can operate their account online from anywhere and continue it even when they change their city and employment. 
• The scheme is portable across jobs and locations.

National Pension Scheme Tier-I Tax Benefits - Section 80CCD

1. Tax Benefits For Self-Contribution

Employees who contribute to NPS can claim the following tax benefits on their contributions:

• Tax deduction of up to 10% of salary (Basic + DA) under Section 80CCD(1), subject to a maximum of Rs.1.5 lakh under Section 80CCE.
• Tax deduction of up to Rs.50,000 under Section 80CCD(1B), along with the overall limit of Rs.1.5 lakh under Section 80CCE.
• The aforesaid deductions cannot be claimed under the new regime.

2. Tax Benefits On Employer Contributions

• Under section 80CCD(2), deduction can be claimed for employer's contribution towards NPS up to 10% of salary (14% in case of new regime).
• If the employer is central government, 14% of salary can be claimed as deduction irrespective of regime chosen.

3. Tax Benefits For Self-employed People

Self-employed individuals who contribute to NPS can claim the following tax benefits on their own contributions:

• Tax deduction of up to 20% of gross income under Section 80CCD(1), subject to a total limit of Rs.1.5 lakh under Section 80CCE.
• Tax deduction of up to Rs.50,000 under Section 80CCD(1B), along with the overall limit of Rs.1.5 lakh under Section 80CCE.
• The aforesaid deductions cannot be claimed under the new regime.

4. Tax Benefits On Withdrawal

Partial Withdrawal

Partial withdrawals from NPS are eligible for tax exemption when the amount withdrawn is up to 25% of self-contribution, subject to the circumstances and criteria prescribed by PFRDA under section 10(12B).

Lump Sum Withdrawal

Section 10 provides a tax exemption on a lump sum withdrawal of 60% of accrued NPS funds upon reaching 60 years or superannuation.

5. Tax Benefit On Annuity Purchase

Tax exemption is provided on annuity purchase or superannuation at 60 years under Section 80CCD(5). However, the subsequent income from an annuity is taxed under Section 80CCD(3).

NPS Withdrawal

The NPS withdrawal rules has been amended recently through an official notification by Pension Fund Regulatory Authority of India. NPS account can now be maintained by a person of age up to 85 years. Key changes in withdrawal limits are as follows:

1. For Government Employees

2. For Non-Government Employees

3. Upon Superannuation

• A person can withdraw up to 80% of the total corpus as a lump amount after retirement, with the remaining 20% going into an annuity plan. 
• Government employees can withdraw up to 60% of the total corpus and opt for annuity for the remaining 40%.
• Subscriber has the option to withdraw the desired amount systematically at regular periodic intervals. i.e, monthly, quarterly, half-yearly or yearly.
• Subscribers can withdraw the entire corpus if it is up to Rs 8 lakh without opting an annuity plan.
• Though withdrawals are tax-free, an annuity is taxable in slab rates. 

4. Pre-mature Exit

• In the event of a premature exit (before reaching the age of superannuation/turning 60), at least 80% of the pension corpus must be used to purchase an Annuity. 
• If the total corpus is less than or equal to Rs.5 lakh, the subscriber can opt for 100% lump-sum withdrawal.

5. Upon the Death of the Subscriber

• Following the subscriber's death, the entire accrued pension corpus (100%) would be paid to the subscriber's nominee/legal heir.

It is to be noted that NPS Tier-II account can be withdrawn anytime, it has no lock-in period.

National Pension Scheme Types

• National Pension Scheme accounts are broadly classified into Tier-I and Tier-II accounts.
• Tier-II account is optional, which can be opened by Tier-I account holders.

NPS Tier I and Tier II Accounts

NPS account can be opened in Tier I or both Tier I and Tier II. The primary differences between Tier-I and Tier-II accounts are given below:

Regulations

• The PFRDA regulates NPS with transparent investment norms, regular performance reviews, and monitoring of fund managers by NPS Trust.

National Pension Scheme Tier-II Tax Benefits - Section 80C

• NPS Tier-II account is an optional account that can be opened by Tier-I account holders.
• Contribution made to Tier-II accounts can be claimed as a deduction under section 80C of the Income Tax Act.
• A minimum lock-in period of 3 years is required to claim this deduction.
• Up to Rs. 1.5 lakh of contribution can be claimed as a deduction, subject to the combined threshold limit under section 80C.
• This deduction cannot be availed under the new tax regime.

NPS - Other Benefits

• Investment Flexibility: NPS gives you option to choose from fund managers, and also you can choose your exposure to equity. If you are an aggressive investor, you can choose highly equity oriented funds, and vice versa.
• Transferability: Even if you switch jobs, you can contribute to your NPS account without any significant paperwork.
• Low Fund Manager Charges: NPS provides one of the lowest fund manager charges, leaving more money for investment and accumulation as compared to other funds.
• Retirement Planning: NPS is a well structured pension plan, which assists you to plan your retirement and prepare a steady income flowing mechanism post retirement.

NPS v/s UPS

As already mentioned, the government has launched Unified Pension Scheme (UPS) as an option under NPS. It guarantees a minimum pension amount on completion of a certain number of years of service. The key differences between NPS and UPS are tabulated below:

How to Open NPS Account?

It is now possible to open an NPS account in less than half an hour. Opening an account online (enps.nsdl.com) is easy, if you link your account to your PAN, Aadhaar and mobile number.

You can validate the registration using the OTP sent to your mobile. This will generate a PRAN (Permanent Retirement Account Number), which you can use for NPS login.

National Pension Scheme - Login

• You can login to your NPS account either through NSDL protean portal or KFintech Portal.
• For NSDL and Kfintech login, you will require the user ID and password to login. The user ID is Permanent Retirement Account Number (PRAN) for login under both the websites.

NPS Customer Care Number

1. NPS Call Centre Number: 1800 110 708
2. NPS SMS Number: NPS to 56677
3. NPS Toll-Free Number For Registered Subscriber (with PRAN): 1800 222 080