Ashwin Kumar Palo


Retirement is a significant phase of life, offering the opportunity to pursue personal interests and enjoy the fruits of one's labour. However, without adequate financial planning, retirement can become a daunting prospect. To address this concern, governments around the world have introduced pension schemes to ensure citizens' well-being during their golden years. In this article, we will delve into the intricacies of one such scheme—the National Pension Scheme. Let's explore the features, benefits, and eligibility criteria of this program designed to provide financial security during retirement.

National Pension Scheme: A Closer Look

The National Pension Scheme, commonly referred to as NPS, is a government-initiated retirement savings scheme in which individuals contribute towards their own pension fund. The scheme was introduced in 2003 and has gained popularity for its attractive features and potential for long-term wealth creation.

1. Eligibility Criteria for National Pension Scheme

Before diving into the specifics, let's address the eligibility criteria for joining the National Pension Scheme:

● Any Indian citizen between the ages of 18 and 65 can enroll in the NPS.

● Non-resident Indians (NRIs) are also eligible to join, subject to certain conditions outlined by the regulatory authorities.

● The scheme is open to both salaried individuals and self-employed professionals.

2. Contribution and Investment Options

The National Pension Scheme offers flexibility in terms of contribution amounts and investment options. Individuals can choose between two types of accounts: Tier-I and Tier-II.

Tier-I Account

● The Tier-I account is the primary retirement account that restricts premature withdrawals and aims at building a corpus for retirement.

● Subscribers must contribute a minimum of Rs 500 monthly or rupees 6,000 per year.

● The account offers diversified investment options such as government securities, corporate bonds, and equities. Subscribers have the freedom to choose their preferred investment allocation.

Tier-II Account

● The Tier-II account is an add-on voluntary savings account that allows subscribers to withdraw funds at any time.

● There are no restrictions on the minimum contribution amount for the Tier-II account.

● The account provides greater liquidity, enabling individuals to meet short-term financial goals.

3. Tax Benefits of National Pension Scheme

The National Pension Scheme offers attractive tax benefits, making it an enticing option for retirement planning. Let's explore the tax advantages associated with the scheme:

● Tax Deduction: Contributions made towards the NPS are eligible for a tax deduction of up to Rs 1.5 lakh under Section 80C of the Income Tax Act.

● Additional Deduction: An additional tax deduction of up to rupees 50,000 can be claimed under Section 80CCD(1B), exclusively available for NPS contributions.

● Tax-Free Returns: The scheme allows for partial tax exemption on the withdrawal amount at the time of retirement. However, a portion of the corpus must be used to purchase an annuity, which is taxable.


The National Pension Scheme (NPS) is a government-sponsored retirement savings program that offers individuals a secure and flexible way to plan for their future. With attractive tax benefits, the NPS allows individuals between the ages of 18 and 65, including non-resident Indians, to contribute towards their own pension fund. The scheme offers two types of accounts: Tier-I, which focuses on building a retirement corpus, and Tier-II, which provides liquidity for short-term financial needs. With diversified investment options and government regulation, the NPS stands out among other retirement plans. It is an effective pathway towards a financially secure retirement. 

(DISCLAIMER: This is an opinion piece. The views expressed are the author’s own and have nothing to do with OTV’s charter or views. OTV does not assume any responsibility or liability for the same.)