Short answer: NPS is a market-linked retirement account regulated by PFRDA. It offers an extra ₹50,000 deduction under Section 80CCD(1B), over and above the ₹1.5 lakh 80C limit, under the old regime. Since December 2025, private-sector subscribers can take up to 80% as a lump sum with only 20% buying an annuity — though the tax law still exempts only 60% of the corpus, so the extra 20% is taxed at slab for now.
Rates and slabs are indicative, as of August 2026
Most people know 80C's ₹1.5L limit. NPS gives an additional ₹50,000 under 80CCD(1B) — over and above that limit. In the 30% bracket, this saves ₹15,600 (including cess) immediately. This extra benefit alone makes NPS worth considering for higher-income earners.
NPS is market-linked, managed by professional fund managers (SBI, LIC, HDFC Pension). You choose between equity, corporate bonds, and government securities, or let the system auto-allocate by age.
PFRDA rewrote the exit rules in December 2025: non-government subscribers now need only 20% in an annuity and can take up to 80% as lump sum, a corpus up to ₹8 lakh can be withdrawn in full, and government subscribers remain on the older 60/40 split. Only 60% of the corpus is tax-exempt on withdrawal. Full exit and annuity rules → Tier I has lock-in; Tier II is like a mutual fund with no lock-in but no extra tax benefits.
NPS for your child: NPS Vatsalya opens the same architecture to minors — with a lock-in that runs to their retirement, which is exactly why it should usually come after the education goal is funded.
Written and checked by the PaisaSamajh editorial desk · Last reviewed: 24 August 2026 · How we check this →
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