National Pension System (NPS) 2026
A low-cost, market-linked retirement account regulated by PFRDA with extra tax benefits.
Rates for July–September 2026 (Q2 FY 2026-27) · Updated 27 September 2026What is National Pension System (NPS)?
The National Pension System is a voluntary, defined-contribution retirement scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Your contributions are invested by a pension fund of your choice across equity (E), corporate debt (C), government securities (G) and alternative assets (A). At exit, part of the corpus is withdrawn as a lump sum and the rest buys an annuity for a lifelong pension. PFRDA’s December 2025 amendments raised the lump-sum limit for non-government subscribers to 80% and allow staying invested up to age 85.
NPS at a glance
| Particular | Details |
|---|---|
| Regulator | PFRDA |
| Entry age | 18–70 years |
| Tier I | Pension account — min ₹1,000/year, restricted withdrawals |
| Tier II | Voluntary savings account — withdraw any time, no tax benefit (except government employees’ lock-in variant) |
| Investment choice | Active (choose E/C/G/A mix; equity up to 75%) or Auto (life-cycle) choice |
| Fund managers | SBI, LIC, UTI, HDFC, ICICI Pru, Kotak, Aditya Birla, Tata, Axis, DSP pension funds |
| Exit at 60 (non-govt) | Up to 80% lump sum, min 20% annuity (corpus above ₹12 lakh) |
| Small corpus | Corpus up to ₹8 lakh can be withdrawn fully |
| Continue till | Age 85 |
| Children | NPS Vatsalya for minors, converts to regular NPS at 18 |
Government-notified terms for July–September 2026 (Q2 FY 2026-27). Verify the latest notification before investing.
Features & benefits of NPS
Fund management charges are among the lowest of any investment product.
₹50,000 over and above the ₹1.5 lakh limit under Section 80CCD(1B) (old regime).
Employer’s contribution up to 14% of basic + DA is deductible under 80CCD(2) in the new regime.
PRAN is portable across jobs and cities.
Change pension fund once a year and asset allocation up to four times a year.
Staggered lump-sum withdrawal till 75/85 instead of one-time payout.
Eligibility — who can invest?
- Indian citizens (resident or NRI) aged 18–70.
- OCI card holders can also join.
- KYC-compliant individuals; one Tier I PRAN per person.
- Minors through NPS Vatsalya (opened by parent/guardian).
How does NPS work?
- Open a PRAN via eNPS (Protean / KFintech / CAMS) or a bank Point of Presence.
- Choose Active or Auto choice and a pension fund manager.
- Contribute any time — minimum ₹1,000 per year in Tier I.
- Units are allotted at the day’s NAV; returns depend on market performance.
- At 60, exit using the lump-sum + annuity rules or defer.
Tax benefits of NPS
| Stage | Tax treatment |
|---|---|
| Own contribution | 80CCD(1) within ₹1.5 lakh + extra ₹50,000 under 80CCD(1B) — old regime |
| Employer contribution | 80CCD(2) up to 14% of salary (new regime) / 10% private (old regime) |
| Lump sum at 60 | Up to 60% of corpus tax-free; any additional lump sum (up to 80%) taxable per current rules |
| Annuity | Pension income taxable at slab rate |
| Partial withdrawal | Tax-free (up to 25% of own contribution) |
Section 80C of the Income-tax Act, 1961 is Section 123 of the Income-tax Act, 2025 from tax year 2026-27. Deductions apply only in the old tax regime.
Withdrawal, premature closure & maturity rules
| Situation | Rule |
|---|---|
| Partial withdrawal | After 3 years; max 25% of own contributions; up to 4 times before 60 with 4-year gap; for education, marriage, house, illness etc. |
| Premature exit (before 60) | Corpus ≤ ₹5 lakh: 100% withdrawal. Above: max 20% lump sum, min 80% annuity. |
| Normal exit (non-govt, 60+) | Corpus ≤ ₹8 lakh: full withdrawal. ₹8–12 lakh: up to ₹6 lakh lump sum / SUR route. Above ₹12 lakh: up to 80% lump sum, min 20% annuity. |
| Government subscribers | Up to 60% lump sum, at least 40% annuity |
| Death | Entire corpus to nominee |
At maturity
| Option | What happens |
|---|---|
| Defer | Stay invested up to 85 |
| Annuity | Purchase from empanelled insurers — rates depend on option (life, joint life, return of purchase price) |
NPS returns — worked examples
| Monthly contribution | Years | Assumed return | Estimated corpus |
|---|---|---|---|
| ₹5,000 | 30 (age 30→60) | 10% p.a. | ≈ ₹1.14 crore |
| ₹5,000 | 25 (age 35→60) | 10% p.a. | ≈ ₹66.9 lakh |
| ₹10,000 | 30 | 10% p.a. | ≈ ₹2.28 crore |
Market returns are not guaranteed. Use the NPS calculator to change assumptions and see lump sum and pension.
NPS calculator
How to open / invest in NPS
- Go to the eNPS portal or your bank’s NPS section.
- Verify with Aadhaar/PAN OTP and complete e-KYC.
- Upload photo & signature, choose scheme and fund manager.
- Make the first contribution (₹500 min in Tier I for opening).
- e-sign the form; receive PRAN.
Documents required
- PAN
- Aadhaar / other KYC
- Bank account details
- Photograph and signature
Important forms
| Form | Purpose |
|---|---|
| CSRF / subscriber registration | Account opening |
| Withdrawal form 601-PW | Partial withdrawal |
| Exit form | Superannuation / premature exit |
Advantages & limitations
- Very low charges
- Extra ₹50,000 deduction
- Equity exposure for long horizons
- Portable PRAN
- Flexible lump sum up to 80% (non-govt)
- Market-linked returns
- Mandatory annuity portion
- Annuity income taxable
- Liquidity restricted before 60
Mistakes to avoid
- Choosing too little equity at a young age
- Forgetting 80CCD(1B) is available only in the old regime
- Not reviewing fund manager performance
- Ignoring employer NPS in the new regime
NPS vs other saving schemes
| Scheme | Rate | Tenure | Minimum | Tax |
|---|---|---|---|---|
| NPS | Market-linked | Till 60 (can stay invested up to 85) | ₹1,000 per year (Tier I) | EET — partly tax-free at exit |
| APY | Guaranteed pension | Till 60 | ₹42/month (age 18, ₹1,000 pension) | Contribution under 80CCD(1) |
| EPF | 8.25% p.a. (FY 2025-26) | Till retirement (58) | 12% of basic + DA | EEE (conditions apply) |
| PPF | 7.1% p.a. | 15 years + 5-year extension blocks | ₹500 per financial year | EEE |
| SCSS | 8.2% p.a. | 5 years, extendable in 3-year blocks | ₹1,000 | EET — deduction on deposit, interest taxable |
Frequently asked questions
What is the minimum NPS contribution?
₹1,000 per year in Tier I.
Can I withdraw 100% NPS at 60?
Only if the corpus is ₹8 lakh or less (non-government). Otherwise up to 80% as lump sum.
Is NPS better than PPF?
NPS offers equity growth and an extra deduction; PPF offers guaranteed tax-free returns. They serve different purposes.
Can NRIs invest in NPS?
Yes, NRIs and OCIs can invest.
What is NPS Vatsalya?
An NPS account opened by parents for a minor, converted to regular NPS at 18.
Information is for education and comparison. Interest rates are notified by the Government every quarter and scheme rules can change — confirm with India Post, your bank, EPFO or PFRDA before investing. FinancePortal is not a financial or tax adviser.