The National Pension System is a government-sponsored retirement savings scheme managed by the Pension Fund Regulatory and Development Authority (PFRDA). Unlike PPF or SCSS, NPS is market-linked — your money is invested in equities, corporate bonds, and government securities, so returns are not guaranteed but have historically ranged from 9–12% p.a. over the long term.
December 2025 brought sweeping changes to NPS rules — the mandatory annuity requirement was dramatically reduced, exit age extended to 85, and loans against NPS holdings are now permitted. NPS has effectively been transformed into one of the most flexible retirement tools available in India today.
- Corpus ≤ ₹8 lakh: Withdraw 100% as lump sum — no annuity required
- Corpus ₹8–12 lakh: Withdraw ₹6 lakh as lump sum; rest via annuity or Systematic Unit Redemption (SUR) over 6+ years
- Corpus > ₹12 lakh (non-govt): Up to 80% as lump sum; minimum 20% must go into annuity
- Premature exit (before 60): Up to 20% lump sum; minimum 80% into annuity
- Partial withdrawals: Up to 4 times before age 60 (increased from 3); max 25% of own contributions; min 4-year gap between withdrawals
- Loan facility (new): Borrow up to 25% of your own contributions from regulated banks using NPS as collateral
NPS offers some of the richest tax deductions available in India under the old tax regime. Under Section 80CCD(1): deduct up to 10% of salary (basic + DA) or 20% of gross income for self-employed, within the ₹1.5 lakh 80C limit. Under Section 80CCD(1B): an additional ₹50,000 deduction exclusively for NPS contributions (over and above 80C). Under Section 80CCD(2): employer contributions up to 14% of salary are tax-free — this benefit is available under BOTH old and new tax regimes. At withdrawal, 60% of lump sum is tax-free; the annuity income is taxable as per slab.
Log into your NPS account on the CRA portal (cra-nsdl.com or karvy-cra.com) → submit the exit/withdrawal request online → select annuity provider and plan if required → the lump sum is credited to your bank account. For offline exit, approach your POP with Form 301 (Superannuation) or Form 302 (Premature Exit).