National Pension System

Scheme Introduction: A Brief Overview

Retirement planning is an important part of building long-term financial security, especially when regular income may reduce after the working years. The National Pension System (NPS) whici is also called National Pension Scheme is a defined-contribution and market-linked pension system designed to help eligible individuals build a retirement corpus through regular contributions. The accumulated pension wealth is invested according to the subscriber's selected investment option and can provide retirement income through a combination of lump-sum withdrawal and annuity, subject to the applicable NPS rules. NPS also offers portability, investment choices and tax benefits under the applicable income-tax provisions.

The scheme was introduced by the Government of India in 2003 and became mandatory for new Central Government recruits, except the Armed Forces, from 1 January 2004. It was subsequently opened to all citizens on a voluntary basis from 1 May 2009. Today, NPS covers the Central Government, State Government, Corporate and All Citizen sectors. The system is regulated by the Pension Fund Regulatory and Development Authority (PFRDA) under the PFRDA Act, 2013.

The Department of Financial Services (DFS), Ministry of Finance, is responsible for the policy framework relating to NPS. The NPS architecture works through specialised intermediaries, including Pension Funds, Central Recordkeeping Agencies, Points of Presence, Trustee Banks, Custodians, Annuity Service Providers and the NPS Trust. This unbundled structure is intended to keep the system transparent, portable and cost-efficient.

NPS offers two main accounts: Tier-I and Tier-II. Tier-I is the primary pension account, in which withdrawals are governed by the applicable NPS rules and tax benefits are available under the Income Tax Act. Tier-II is an optional investment account linked to an active Tier-I account and generally permits unrestricted withdrawals. The minimum contribution for opening a Tier-I account is ₹500, while the minimum annual contribution is ₹1,000. For Tier-II, the opening contribution is ₹1,000 and the minimum subsequent contribution is ₹250.

NPS offers flexibility in choosing the pension fund and investment option. The account is portable, so it can continue even if you change your job, employer or location. The PRAN remains linked to your NPS account.

NPS also provides tax benefits on eligible contributions under the applicable income-tax rules. At retirement or exit, the corpus can be withdrawn or used to purchase an annuity as per the applicable rules. The annuity pension is taxed according to the prevailing tax rules.

NPS and tax rules may change from time to time. Subscribers should check the latest government rules before making investment or withdrawal decisions.

For eligible subscribers, NPS provides a structured way to accumulate retirement savings while offering flexibility in investment and account management. Those looking for other pension-focused welfare schemes can also explore Atal Pension Yojana (APY), which focuses on providing a guaranteed pension to eligible subscribers, NPS Vatsalya Scheme which helps parents and legal guardians build long-term savings for their children and NPS Sanchay Scheme which is simplified pension scheme under the National Pension System (NPS).

How Does National Pension System (NPS) Work?

National Pension Scheme works by allowing subscribers to regularly contribute money towards their retirement. The contributions are invested in market-linked assets through the pension fund and investment option selected by the subscriber.

• The subscriber makes regular contributions to the NPS account.
• The contributions are invested across permitted asset classes such as equity, corporate bonds and government securities.
• The investment value can increase or decrease depending on market performance.
• The accumulated amount, known as the pension corpus, grows over the investment period based on contributions and investment performance.
• At the time of exit, the corpus can be used for a lump-sum withdrawal and to purchase an annuity, according to the applicable NPS rules.
• The annuity then provides a regular pension income according to the annuity option selected by the subscriber.

In simple terms, National Pension System (NPS) helps subscribers build their retirement savings during their working years and use the accumulated corpus to create retirement income after exit.

Scheme Benefits

The National Pension Scheme helps subscribers build a retirement corpus through regular contributions and market-linked investments. Some of the key benefits of NPS are:

• Helps build a retirement corpus through regular contributions during the working years.
• Provides market-linked investment options across equity, corporate bonds, government securities and other permitted assets.
• Allows subscribers to choose between Active Choice and Auto Choice for managing their investment allocation.
• Provides tax benefits on eligible NPS contributions under the applicable income-tax provisions.
• Eligible employer contributions to NPS can also qualify for tax benefits under the applicable provisions.
• Offers portability, allowing the same NPS account and PRAN to continue when a subscriber changes jobs or locations.
• Provides a lump-sum withdrawal and annuity option at exit, according to the applicable NPS rules.
• Allows eligible subscribers to make partial withdrawals from their own contributions for specified purposes, subject to the prescribed conditions.
• Provides access to different pension funds and investment options, giving subscribers flexibility in managing their retirement savings.
• Offers an optional Tier-II account for subscribers who want a more flexible investment account alongside their Tier-I account.

NPS does not provide a fixed rate of return because its investments are market-linked. The final retirement corpus and pension depend on factors such as the amount contributed, investment performance, investment period and the annuity selected at exit.

National Pension System (NPS) Contribution Rules

The contribution amount under National Pension Scheme depends on the subscriber's NPS model. Under the All Citizen Model, subscribers can choose how much they want to contribute and can make contributions as per their financial needs, subject to the applicable minimum requirements.

• A minimum of ₹500 is required to open a Tier-I NPS account.
• Subscribers need to contribute at least ₹1,000 to their Tier-I account in a financial year.
• There is no maximum limit on the amount that can be contributed to NPS.
• Central Government employees contribute 10% of their Basic Pay plus Dearness Allowance, while the Government contributes 14%.
• Under the Corporate Model, the employer's contribution depends on the terms adopted by the organisation and the applicable NPS rules.
• Subscribers can make additional contributions whenever they wish, subject to the rules of their NPS account.
• Contributions can be made through authorised online facilities, Points of Presence and other permitted NPS channels.

The money contributed to NPS is invested according to the investment option selected by the subscriber. Since NPS is market-linked, the final retirement corpus depends on factors such as the amount contributed, investment period and market performance.

Eligibility Requirements

The eligibility for the National Pension Scheme depends on the NPS model a person wants to join. The main eligibility requirements are:

• Under the All Citizen Model, Indian citizens, including resident Indians, NRIs and OCIs, can join NPS if they meet the applicable KYC requirements.
• The age for joining NPS under the All Citizen Model is 18 to 85 years.
• The subscriber must be legally competent to enter into a contract under the applicable law.
• Hindu Undivided Families (HUFs) and Persons of Indian Origin (PIOs) are not eligible to open an NPS account under the All Citizen Model.
• Eligible Central Government employees covered under NPS are required to participate in the system according to the applicable government rules.
• Employees of State Governments and Union Territories can be covered under NPS where the respective government has adopted the system.
• Employees of eligible companies and organisations can join NPS under the Corporate Model when their employer has adopted NPS.
• NPS Vatsalya is available for eligible minors, with the account opened in the child's name and operated by a parent or legal guardian until the child reaches adulthood.
• Each NPS account is opened in the name of an individual subscriber and is linked to a Permanent Retirement Account Number (PRAN).

The eligibility conditions can differ between NPS models, particularly for age, employment category, KYC and withdrawal rules. Applicants should therefore check the requirements applicable to their specific NPS model before opening an account.

National Pension System (NPS) Tier-I and Tier-II Accounts

National Pension Scheme provides two types of accounts to meet different savings needs. Tier-I is the main retirement account, while Tier-II provides greater flexibility for subscribers who want an additional investment account.

Required Documents

Applicants need to provide basic identity, address and KYC documents while opening an NPS account. The documents may vary slightly depending on the subscriber category and the mode of registration.

• PAN card for identity and tax-related verification.
• Aadhaar card or another valid proof of identity and address.
• Recent passport-size photograph.
• Bank account details for making contributions and receiving applicable payments.
• Nominee details as required during account registration.
• NRIs may need to provide passport, overseas address proof and NRE or NRO bank account details.
• OCIs may need to provide their OCI card, passport, address proof and applicable bank account details.

Additional documents may be required depending on the subscriber's NPS model and KYC requirements. Applicants should keep valid and updated documents ready before starting the registration process.

Steps to Apply

Opening an National Pension Scheme (NPS) account is straightforward, and eligible individuals can complete the registration either online or with the help of a registered Point of Presence (PoP). The online route is useful for applicants who want to complete the process without visiting a service provider.

• Visit the official eNPS platform and select the option to open a new NPS account.
• Choose the available registration method and complete your KYC verification using the required identity and address details. Depending on the facility available, you may be able to verify your details through Aadhaar or PAN.
• Enter your personal details, contact information, bank account details and nominee information carefully. Make sure the details match your supporting documents.
• Select your Pension Fund and preferred investment option based on the available NPS choices.
• Upload your photograph, signature and other required documents, if asked during the registration process.
• Make the initial contribution to your Tier-I account. A minimum contribution of ₹500 is required to open the account.
• Complete the required e-sign or electronic authentication process to submit your application.
• Once your registration is successfully completed and verified, you will receive a Permanent Retirement Account Number (PRAN). This number remains linked to your NPS account even if you change your job, employer or location.
• If you want to apply offline, visit a registered Point of Presence (PoP) and submit the NPS registration form along with the required KYC documents. The PoP will help you complete the registration and other NPS-related formalities.

Offline

• If you want to open an NPS account offline, you can visit a registered Point of Presence (PoP). These service providers are authorised by the Pension Fund Regulatory and Development Authority (PFRDA) to help subscribers with NPS registration and other account-related services.
• You can collect the NPS registration form from a PoP-Service Provider (PoP-SP), fill it in and submit it along with the required KYC documents.
• The PoP-SP will process your registration and help you complete the account-opening process.
• To find a nearby PoP-Service Provider, you can check the list of registered PoPs available on the concerned CRA website.

National Pension System (NPS) Investment Options

National Pension Scheme contributions are invested in market-linked assets, so the returns are not fixed. Subscribers can choose how their money is invested based on the options available under NPS.

• Equity (E): Invests in equity and offers higher growth potential with higher market risk.
• Corporate Bonds (C): Invests in corporate debt securities and generally carries lower risk than equity.
• Government Securities (G): Invests mainly in government securities and related instruments.
• Alternative Investments (A): Invests in permitted alternative investment instruments, subject to the prescribed limits.

Subscribers can generally choose between Active Choice and Auto Choice. Under Active Choice, the subscriber selects the asset allocation. Under Auto Choice, the allocation is adjusted automatically based on the subscriber's age and selected life-cycle option.

National Pension System (NPS) Withdrawal and Exit Rules

National Pension Scheme withdrawal rules depend on factors such as the subscriber's NPS model, age, accumulated corpus and the type of exit. The rules were revised in December 2025, so the withdrawal conditions are now different for government and non-government subscribers.

Normal Exit for Non-Government Subscribers

Under the revised rules, eligible non-government subscribers, including those covered under the All Citizen and Corporate Models, can generally withdraw up to 80% of their NPS corpus as a lump sum. At least 20% of the corpus is used to purchase an annuity.

• If the accumulated corpus is up to ₹8 lakh, the subscriber can withdraw the eligible amount as permitted under the revised rules.
• For a corpus above ₹8 lakh and up to ₹12 lakh, the subscriber can use the permitted systematic withdrawal option or choose the applicable lump-sum and annuity option.
• If the corpus is above ₹12 lakh, up to 80% can generally be withdrawn as a lump sum, while at least 20% is used to purchase an annuity.

Normal Exit for Government Subscribers

The exit rules for government-sector subscribers are different. At normal exit, eligible subscribers can generally withdraw up to 60% of the corpus as a lump sum, while at least 40% is used to purchase an annuity, subject to the applicable NPS rules.

Premature Exit

If a subscriber exits NPS before meeting the conditions for a normal exit, different withdrawal rules apply. Generally, up to 20% of the corpus can be taken as a lump sum, while at least 80% is used to purchase an annuity, subject to the applicable conditions.

The revised rules have also changed some of the earlier exit and lock-in conditions for eligible non-government subscribers. Since the applicable rules can vary by NPS model and subscriber category, it is important to check the conditions that apply to your account before making an exit request.

National Pension System (NPS) Partial Withdrawal Rules

National Pension Scheme allows subscribers to withdraw a part of their own contributions while continuing their account. Partial withdrawal is allowed only for specified purposes and subject to the applicable conditions.

• The first partial withdrawal can generally be made after completing three years of subscription.
• Up to 25% of the subscriber's own contributions can be withdrawn. The investment returns are not included when calculating this limit.
• Before the age of 60, partial withdrawal can generally be made up to four times, with a minimum gap of four years between withdrawals.
• After the age of 60, partial withdrawal can be made as permitted under the rules, with a minimum gap of three years between withdrawals.
• Withdrawal is allowed for specified purposes such as children's higher education or marriage, purchase or construction of a residential house, and certain medical expenses.

National Pension System (NPS) vs PPF, EPF and APY

National Pension Scheme is one of several retirement and pension-related options available in India. PPF, EPF and Atal Pension Yojana (APY) have different eligibility conditions, contribution structures, returns and withdrawal rules. The following comparison gives a simple overview.

The right choice depends on factors such as eligibility, retirement goals, investment preference, tax position and the level of market exposure a person is comfortable with. These schemes should therefore be compared on their individual rules rather than only on the basis of returns or pension amounts.

National Pension System (NPS) Corpus and Annuity

The National Pension System (NPS) corpus is the total pension wealth accumulated in the subscriber's account over time. It is built through the subscriber's contributions and the returns generated by the investments. Since NPS is market-linked, the value of the corpus can change with market performance.

At the time of exit, the subscriber can use the accumulated corpus according to the withdrawal rules applicable to their NPS model. A permitted portion can be taken as a lump sum, while the required portion is used to purchase an annuity.

An annuity is a financial product that provides a regular income after retirement. The amount used to purchase the annuity is paid to an authorised Annuity Service Provider, which then provides pension payments according to the terms of the selected annuity.

• The lump-sum portion can be withdrawn according to the applicable NPS exit rules.
• The annuity portion is used to purchase an annuity for generating regular retirement income.
• The amount of pension depends on factors such as the amount used to purchase the annuity, the annuity option selected and the prevailing annuity rates.
• The pension received from the annuity is taxable according to the applicable income-tax provisions.

Unified Pension Scheme (UPS) and NPS

The Unified Pension Scheme (UPS) is an option introduced within the NPS framework for eligible Central Government employees. It is different from the regular market-linked NPS benefit structure because it provides an assured payout subject to the prescribed service and contribution conditions.

• UPS became operational from 1 April 2025.
• Eligible Central Government employees can receive an assured pension based on the prescribed service period and average basic pay.
• After 25 years of qualifying service, the assured pension is generally linked to 50% of the average basic pay of the last 12 months, subject to the applicable conditions.
• A minimum assured payout of ₹10,000 per month is prescribed for eligible employees with at least 10 years of qualifying service, subject to the scheme conditions.
• Eligible family members can receive a family payout under the prescribed UPS rules.
• Dearness Relief is provided according to the applicable provisions.
• UPS and regular NPS have different pension and exit structures, so eligible Central Government employees should compare the applicable rules before making a choice.

The UPS option is intended for eligible Central Government employees and should not be confused with the All Citizen Model of NPS, which remains a voluntary market-linked retirement savings option for eligible individuals.

Relevant Links

• Department of Financial Services – National Pension System
• Department of Financial Services – Official Portal
• Income Tax Department – Official Portal
• National Pension System (NPS) Guidelines
• National Pension System (NPS) Application Form

Contact Information

For assistance related to an NPS account, subscribers can contact their registered service provider or the concerned Central Recordkeeping Agency (CRA). The Department of Financial Services lists the following NPS helpline numbers:

• Protean (NSDL): 1800 222 080
• KFin Technologies: 1800 208 1516

Subscribers can also raise an NPS grievance through the Central Grievance Management System (CGMS) after logging into their NPS account. For account-specific issues, it is advisable to contact the CRA or Point of Presence through which the NPS account is serviced.