Last updated: 2026-10-21
How NPS pays you at retirement (rules from December 2025)
- Private sector and self-employed: at least 20% of the corpus buys an annuity (monthly pension for life), and up to 80% can be taken as a lump sum.
- Government employees: at least 40% goes to the annuity, and up to 60% can be withdrawn.
- Only 60% of the corpus is tax-free as a lump sum. Anything withdrawn above that is taxed at your slab rate.
- Small corpus: if the total is ₹8 lakh or less, you can usually withdraw it all. Check the latest PFRDA rules for small balances.
- The pension is added to your income and taxed at your slab rate.
Tax benefits
- Old regime: your contribution counts for 80C (₹1.5 lakh) plus an extra ₹50,000 under 80CCD(1B).
- Both regimes: your employer's contribution is deductible under 80CCD(2), up to 14% of basic + DA in the new regime.
Frequently asked questions
Is the NPS pension guaranteed?
The annuity rate is fixed when you buy it at retirement, so the pension amount is then guaranteed for life. The corpus before that depends on market returns.
Can I withdraw NPS early?
Partial withdrawals of up to 25% of your own contributions are allowed after 3 years for things like children's education, marriage, a house or medical treatment, up to 3 times.
What annuity rate should I assume?
Annuity rates in India have been around 5.5–7% a year. 6% is a reasonable planning figure.