The National Pension System (NPS) is a retirement savings scheme regulated by PFRDA. You contribute regularly to a Tier I account, choose how much goes into equity, corporate bonds and government securities, and build a retirement corpus managed by pension fund managers. A Tier II account is optional and works more like a flexible savings account.
NPS has strict withdrawal rules because it is meant for retirement. At exit, part of the corpus is used to buy an annuity that pays a pension. Rules on withdrawal and annuity are set by PFRDA and have been changing, so we explain the current rules clearly before you open an account.
Who it suits
- Salaried employees building a pension
- Taxpayers under the old regime
- Employees whose employer offers NPS
- Self-employed without a pension
How NPS works
- 1
Open your account
You register for a Permanent Retirement Account Number (PRAN) with KYC details.
- 2
Choose your allocation
You pick active choice to set your equity and debt mix, or auto choice where equity reduces with age.
- 3
Contribute regularly
You invest in Tier I monthly or yearly, and optionally in Tier II for flexible savings.
- 4
Withdraw at retirement
At exit, part of the corpus can be withdrawn as a lump sum and part goes to buy an annuity, as per current PFRDA rules.
Why families choose it
Extra tax deduction
An additional deduction of up to ₹50,000 under Section 80CCD(1B) is available under the old tax regime.
Employer contribution benefit
Employer contributions under Section 80CCD(2) may be deductible under the new tax regime too.
Low cost
NPS fund management charges are low compared with many other investment products.
Choice of asset mix
You can decide your equity and debt split, or let it adjust automatically with age.
Retirement discipline
Withdrawal limits help ensure the money is actually there when you retire.
Things to know, and risks
- Equity and bond portions can fall in value, so the corpus is not fixed.
- Tier I money is largely locked until retirement, with only limited partial withdrawals.
- A portion of the corpus must buy an annuity, and annuity income is taxable.
- PFRDA rules on withdrawal and annuity have changed over time and may change again.
Tax treatment
Under the old tax regime, contributions can qualify under Section 80CCD(1) within the 80C limit, plus an extra ₹50,000 under Section 80CCD(1B). Employer contributions under Section 80CCD(2) may be deductible under both regimes, within limits. Part of the lump sum at retirement is currently tax-free, while annuity income is taxable. Tax rules change; section numbers may differ under the Income-tax Act, 2025, so confirm with your tax professional.
For families in Tirupati
Tirupati has a large salaried community: state and central government staff, university and hospital employees, and professionals commuting to Sri City. Many already have NPS through work but rarely look at their allocation. We help you check your PRAN, understand whether your equity mix suits your age and see whether an extra voluntary contribution makes sense under the tax regime you have chosen.
Run the numbers
Retirement Calculator
How much money do you need on the day you retire, and how much should you invest every month until then? This calculator takes your current monthly expenses, grows them with inflation to your retirement age, and works out a corpus that can fund rising expenses until the age you plan for. It then shows the SIP needed to build it.
Frequently asked questions
What is the difference between NPS Tier I and Tier II?
Tier I is the main retirement account with tax benefits and withdrawal restrictions until retirement. Tier II is an optional voluntary account that allows withdrawals at any time, but generally does not offer the same tax benefits. You need a Tier I account to open Tier II.
How much tax can I save with NPS?
Under the old tax regime, you can claim up to ₹50,000 extra under Section 80CCD(1B), over and above the ₹1.5 lakh 80C limit. Employer contributions under 80CCD(2) may be deductible under both regimes. Your actual saving depends on your tax slab.
Can I withdraw money from NPS before 60?
Yes, partial withdrawals from Tier I are allowed for specific purposes such as children's education, marriage, buying a house or treating serious illness, subject to conditions set by PFRDA. Premature exit is also possible, but a larger share must then go into an annuity.
What happens to NPS at 60?
At 60, you can withdraw part of your corpus as a lump sum, while at least 40% has traditionally gone towards buying an annuity that pays a monthly pension. Rules on withdrawal and annuity are set by PFRDA and have been changing, so check the current rules before you exit.
Is NPS good for government employees?
NPS is the default pension scheme for many government employees who joined after it was introduced, with employer contributions built in. Central government staff may also have other pension options under newer schemes. We help you understand your current NPS allocation and whether voluntary contributions make sense.
Can NRIs invest in NPS?
Yes, NRIs aged 18 to 70 can open an NPS account, subject to KYC and the account type they use. Contributions are made in rupees through NRE or NRO accounts. The rules on repatriation and tax differ, so we walk NRI families from Tirupati through the details.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully. This page is for general information and is not a recommendation to buy any specific product.
Last reviewed 12 Oct 2026.