Build a secure future with the National Pension System

November 13, 2025 Finance Talk Valli Sarvani

Planning for retirement is essential for financial independence and peace of mind.

The National Pension System (NPS), a government-backed and voluntary savings plan, enables individuals to build a steady retirement corpus while enjoying market-linked returns.

NPS functions as a long-term retirement account where you contribute regularly during your working years.

Your money grows through investments in equity, corporate debt, or government securities, depending on your risk preference.

Upon turning 60, you can withdraw up to 60% of your corpus tax-free, while the remaining 40% must purchase an annuity that provides a monthly pension.

NPS offers two types of accounts. Tier I is the main retirement account that comes with tax benefits but limited withdrawal flexibility.

Tier II is a voluntary savings account that offers liquidity but no additional tax incentives.

Moreover, investors can switch fund managers or modify their asset allocation, ensuring flexibility and control.

NPS offers attractive tax benefits. Contributions up to ₹1.5 lakh per year qualify for deduction under Section 80CCD(1), as part of Section 80C.

An extra deduction of ₹50,000 under Section 80CCD(1B) takes the total annual deduction to ₹2 lakh.

Additionally, employer contributions up to 10% of salary are deductible under Section 80CCD(2).

If you start investing ₹5,000 per month at age 30 and continue till 60, assuming a 10% annual return, your total investment of ₹18 lakh could grow to around ₹1.13 crore.

At retirement, you can withdraw ₹68 lakh tax-free, while ₹45 lakh would go into an annuity. A 6% annuity rate could provide a monthly pension of ₹22,000–₹23,000 for life.

NPS is low-cost, transparent, and tax-efficient. Its fund management charges are among the lowest worldwide, ensuring higher net returns.

Moreover, it offers better long-term growth than traditional options like PPF or fixed deposits.

Therefore, NPS stands out as a smart and disciplined way to secure your retirement future.

Image from Pxhere (Free for commercial use / CC0 Public Domain)

Image Published on February 26, 2017