National Pension System
By Meera Iyer
Last Updated
July 2026 Fact Checked By: Schemewala Editorial Team
Quick Summary
| Detail | Information |
|---|---|
| Scheme Name | National Pension System (NPS) |
| Regulator | PFRDA |
| Target Audience | All Indian citizens (Age 18-70) |
| Extra Tax Benefit | ₹50,000 over and above the 80C limit |
| New 2026 Exit Rule | Private subscribers can withdraw 80% as lump sum |
About the Scheme
The National Pension System (NPS) is a market-linked, voluntary retirement scheme. You invest money during your working years, the money grows in equity and debt markets, and you use the accumulated corpus to buy a pension (annuity) when you retire.NPS has two accounts:
- Tier 1: The strict retirement account (tax benefits, locked until age 60).
- Tier 2: A voluntary savings account (no tax benefits for private citizens, withdraw anytime). You must have a Tier 1 account to open a Tier 2 account.
High-Value Insider Info: 2026 Rules & Tax Hacks
- The ₹50k Tax Hack (Section 80CCD(1B)): Everyone knows about the ₹1.5 Lakh tax deduction under Section 80C. But NPS Tier-1 gives you an exclusive, additional deduction of ₹50,000 under Section 80CCD(1B). This means you can claim a total of ₹2 Lakh in deductions.
- The 80% Exit Rule (Massive 2026 Change): Previously, at age 60, you had to forcefully buy an annuity (pension) with 40% of your money. Under the new 2026 rules for non-government subscribers: If your corpus is over ₹12 Lakh, you can now withdraw 80% as a lump sum (tax-free up to 60%) and only need to buy an annuity with the remaining 20%.
- The NPS Vatsalya Reality: Introduced recently, NPS Vatsalya allows parents to open an NPS account for their minor child. When the child turns 18, it automatically converts into a normal Tier 1 account. Hidden Rule: You can only make a maximum of 3 partial withdrawals before the child turns 18, and only for specific reasons like education or medical emergencies.
Eligibility Criteria
- Any Indian citizen (resident or non-resident).
- Age between 18 and 70 years (for standard NPS).
Exact Navigation Path: How to Open an NPS Account
Do not pay a broker to open this for you.
- Go to the official portal: enps.nsdl.com or your bank’s net banking portal.
- Select "National Pension System" and click "Registration".
- Keep your Aadhaar, PAN, and a cancelled cheque ready.
- Complete the Aadhaar e-KYC.
- Choose your Fund Manager (PFM): You must select a company (like SBI Pension Funds, HDFC, LIC) to manage your money.
- Choose your Investment Choice: Auto Choice: The system automatically reduces equity risk as you get older. Active Choice: You manually decide how much goes into Equity (E), Corporate Debt (C), and Government Bonds (G). (Max 75% in Equity allowed).
Important Links
| Purpose | Link |
|---|---|
| eNPS Registration | enps.nsdl.com |
| NPS Trust | npstrust.org.in |
FAQs
Is the money I withdraw at age 60 tax-free?
Yes, up to a limit. When you hit 60, you can withdraw up to 60% of your total corpus completely tax-free. The amount you use to buy an annuity is also tax-exempt at the time of purchase, but the monthly pension you receive later will be taxed according to your income tax slab.