Athira Sethu
Kochi, 3 March 2026
The National Pension Scheme (NPS) is a retirement savings scheme gaining popularity in India. It was initiated by the Government of India with the aim of helping individuals save for retirement. NPS is a relatively good option for retirement savings due to its attractive features such as tax benefits and the possibility of earning higher returns on investment.
There are two types of accounts offered under NPS: Tier 1 and Tier 2 accounts. Tier 1 is the main retirement savings account, while Tier 2 is a more liberal option with easier access to funds. Investments under NPS are made in a mix of government bonds, corporate bonds, and stocks. This is why NPS is a relatively lucrative option for retirement savings. Your funds will be managed by professional fund managers who will invest your funds wisely.
Tax benefits offered by NPS:
NPS offers significant tax benefits under Section 80C. Contributions worth Rs 1.5 lakh qualify for a tax deduction under Section 80C. Additionally, you can also claim a further Rs 50,000 under Section 80CCD(1B), making the total tax savings Rs 2 lakh annually. NPS is a relatively attractive option for those who fall under the higher income tax bracket.
NPS also provides for a regular income after retirement. When you turn 60, you can withdraw 60% of the amount accumulated in a lump sum. The remaining 40% has to be used to buy an annuity that gives you a monthly pension. This guarantees that you have a steady income after retirement.
The scheme also has a lock-in period, meaning that you cannot withdraw your money before you turn 60. This ensures that you save for retirement. You also have the option to withdraw part of the amount in certain situations, such as in the case of a medical emergency.
NPS also gives you the option to invest in different ways. You have the option to invest in the Active Choice, where you have to make your own investment choices, or in the Auto Choice, where the investment choices change based on your age. Also, the fees are low, and the scheme is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
