The National Pension System (NPS) has seen a few key updates in 2026, making it more flexible and tax-efficient for investors. From changes in withdrawal rules to added features like phased withdrawals and faster NAV processing, the system continues to evolve to suit both salaried and self-employed individuals.
Whether you are just starting with NPS, looking to save more tax under Section 80CCD, or planning your withdrawals, this FAQ covers the essentials. It answers common questions around rules, tax benefits, account types, and withdrawal options — in a simple, easy-to-follow way.
1. How do I set up Systematic Lumpsum Withdrawals (SLW) in 2026?
SLW lets you defer your NPS corpus beyond age 60 and withdraw in periodic instalments instead of a lump sum. To set it up:
- Log in to your NPS account via the NPS portal.
- At exit/retirement, instead of selecting "Exit," choose "Systematic Lumpsum Withdrawal."
- Choose frequency — monthly, quarterly, half-yearly, or annual — and the instalment amount or number of instalments.
- The remaining corpus stays invested and continues to earn market-linked returns.
- You can opt for SLW up to age 75 (or 85 if you exercised the new deferral option).
The lump-sum portion at maturity remains tax-free; only the annuity income is taxed as per your slab.
2. What is the new 80:20 withdrawal rule for non-government subscribers?
For non-government (private/self-employed) subscribers, PFRDA revised the exit rule:
- 80% of the corpus must be used to purchase an annuity from a PFRDA-empanelled insurer.
- 20% can be withdrawn as a tax-free lump sum.
- This applies on normal exit at age 60.
- If the total corpus is = ?8 lakh, the subscriber may withdraw 100% as a lump sum.
Government subscribers still follow a 40% lump sum + 60% annuity rule at normal exit.
3. Can I withdraw 100% of my NPS corpus if it is below ?8 lakh?
Yes. PFRDA raised the full-withdrawal threshold to ?8 lakh (up from ?5 lakh earlier). Key conditions:
- Total accumulated corpus (Tier 1) must be equal to or below ?8 lakh at the time of exit.
- Applies to both normal exit (age 60) and premature exit.
- The entire withdrawal is tax-free in this scenario.
- No mandatory annuity purchase is required when this threshold applies.
4. How can I claim the additional ?50,000 tax deduction under Section 80CCD(1B)?
Section 80CCD(1B) gives an exclusive ?50,000 deduction over and above the ?1.5 lakh 80C limit:
- Contribute at least ?50,000 to your Tier 1 NPS account in the financial year.
- Obtain your Transaction Statement / Contribution Statement from NPS portal.
- Enter the amount in Schedule 80CCD(1B) in your ITR.
- Available under both Old Tax Regime only — this deduction is not available under the New Tax Regime.
Effective for those in the 30% slab, this saves up to ?15,600 in tax (?50,000 × 30% + cess).
5. Is the employer’s 14% contribution deductible under the New Tax Regime?
Yes — this is one of the very few deductions still available under the New Tax Regime (post Finance Act 2023):
- Employer contribution to NPS under Section 80CCD(2) is deductible up to 14% of basic + DA (for central govt employees) or 10% for private sector employees.
- This deduction is available even if you opt for the New Tax Regime.
- It reduces your gross total income directly.
- Ensure your employer has correctly reflected this in Form 16 before filing.
6. What is the "D-Remit" facility for same-day NAV?
D-Remit (Direct Remittance) allows contributions to be credited to your NPS account on the same day they are remitted:
- A unique Virtual Account Number (VAN) is assigned to each NPS subscriber.
- Transfer funds to this VAN via NEFT/RTGS/IMPS before the cutoff time (typically 9:30 AM for same-day NAV).
- Ensures same-day NAV (Net Asset Value) allocation instead of T+1 or T+2 processing.
- Especially useful when markets are volatile — you lock in that day’s NAV.
- Available for Tier 1 and Tier 2 accounts. Generate VAN from your NPS portal under "D-Remit."
7. What are the new rules for partial withdrawal in 2026?
PFRDA has liberalised partial withdrawal conditions. You can now withdraw up to 25% of your own contributions (not employer’s) subject to:
- Minimum 3 years of NPS membership.
- Allowed up to 3 times during the entire NPS tenure.
- Permitted purposes include: children’s higher education/marriage, purchase/construction of first house, treatment of critical illness (self/spouse/children/parents), disability (=75%), skill development, or starting a business.
- New 2026 addition: natural calamity has been added as a permitted reason for partial withdrawal.
- Partial withdrawals are tax-free in the hands of the subscriber.
8. Can I stay invested in NPS until the age of 85?
Yes — PFRDA extended the maximum deferral age from 75 to 85 years in 2024–25, now fully operationalised in 2026:
- You can defer your NPS exit and continue contributing (or stay invested without contributing) up to age 85.
- During deferral, corpus remains invested in your chosen asset class and fund manager.
- You can make contributions and get tax benefits during the deferral period too.
- SLW instalments can be scheduled during the deferral period (up to age 85).
9. How do I change my Pension Fund Manager (PFM) or Asset Allocation?
You are allowed 1 PFM change and unlimited scheme preference changes per financial year:
- Log in to your account at NPS portal.
- Go to "Change in Scheme Preference / PFM."
- Select a new PFM from the approved list (SBI, HDFC, LIC, UTI, Kotak, Aditya Birla, ICICI, Tata, Max Life).
- Adjust your Active Choice allocation across Equity (E), Corporate Bonds (C), Government Securities (G), and Alternative Assets (A) — or switch to Auto Choice (LC75, LC50, LC25 life cycle funds).
- Changes are processed by the next business day.
Equity (E) is capped at 75% for subscribers under 50 and reduces progressively after 50 under Auto Choice.
10. What is National Pension System (NPS) and how does it work?
NPS is a voluntary, defined-contribution retirement savings scheme regulated by PFRDA (Pension Fund Regulatory and Development Authority):
- You contribute regularly during your working years; contributions are invested in market-linked funds (equity, bonds, govt securities).
- At retirement (age 60), you use a portion of the corpus to buy an annuity (regular pension) and can withdraw the rest as a lump sum.
- Open to all Indian citizens aged 18–70 (entry age), including NRIs.
- Two types of accounts: Tier 1 (retirement/locked) and Tier 2 (voluntary savings/liquid).
- Regulated, low-cost, and portable across jobs and cities.
11. What are the tax benefits under NPS (Section 80C & 80CCD)?
NPS offers three layers of tax deduction (under Old Tax Regime):
- 80CCD(1): Self-contribution deductible up to 10% of basic+DA (employees) or 20% of gross income (self-employed), within the ?1.5 lakh overall 80C limit.
- 80CCD(1B): Additional exclusive ?50,000 deduction over and above 80C.
- 80CCD(2): Employer’s contribution (up to 14% for govt, 10% for private) — available even under New Tax Regime.
- At maturity: 60% lump sum is fully tax-free; annuity income is taxable as per slab.
Maximum combined self-contribution deduction: ?2,00,000 per year (?1.5L + ?50K).
12. How to open an NPS account online/offline?
You can open an NPS account either online or offline in just a few simple steps.
Online:
- Visit Alankit’s NPS portal
- Use Aadhaar-based e-KYC (OTP authentication) for instant account opening.
- Or use PAN + net banking (non-Aadhaar route).
- Minimum initial contribution: ?500 for Tier 1.
Offline (through PoP):
- Visit a Point of Presence (PoP) — any major bank (SBI, HDFC, ICICI, Axis, etc.) or post office.
- Submit PRAN application form with KYC documents (Aadhaar, PAN, photo).
- A PRAN (Permanent Retirement Account Number) is allotted — this is your lifelong NPS ID.
13. What is the difference between Tier 1 and Tier 2 NPS accounts?
Both accounts are under the same PRAN but serve very different purposes:
- Tier 1: Mandatory retirement account. Locked until age 60. Tax deductions available. Minimum ?1,000/year to keep active. Partial withdrawals allowed under specific conditions.
- Tier 2: Voluntary savings account. Fully liquid — withdraw anytime, no lock-in. No tax deductions (except for Govt employees with 3-year lock). No minimum contribution requirement after opening. Minimum opening contribution: ?250.
Tier 2 is essentially a mutual fund-like account. For tax benefits, always prioritise Tier 1.
14. What is the minimum and maximum investment in NPS?
- Tier 1 minimum: ?500 per contribution; ?1,000 per financial year to keep account active.
- Tier 2 minimum: ?250 per contribution; no annual minimum.
- Maximum: No upper limit on contributions. However, tax deductions are capped as per 80C/80CCD limits.
- You can contribute any number of times per year — lump sum, monthly SIP, or ad hoc.
15. What is the NPS interest rate/returns and how are they calculated?
NPS does not have a fixed interest rate — returns are market-linked:
- Your corpus is invested in Equity (E), Corporate Bonds (C), Government Securities (G), and Alternative Assets (A) as per your chosen allocation.
- Returns are reflected in the NAV of your chosen pension fund.
- Historically, Tier 1 equity schemes have delivered 10–14% CAGR over 10+ year periods; debt/G-sec schemes around 8–9%.
- Performance varies by PFM and market conditions — past returns do not guarantee future performance.
- Check fund-wise returns on the PFRDA website or NPS Trust portal.
16. How to withdraw money from NPS and what are the exit rules?
There are three exit scenarios:
- Normal exit (age 60): Minimum 40% annuity + up to 60% tax-free lump sum. (Non-govt: 80% annuity rule applies if corpus > ?8 lakh.)
- Premature exit (before 60, after 5 years): Minimum 80% annuity + up to 20% lump sum. If corpus = ?2.5 lakh, 100% withdrawal allowed.
- Death of subscriber: Entire corpus paid to nominee as lump sum (100%), tax-free.
Initiate exit through NPS portal or your PoP bank.
17. What is the retirement age and maturity process in NPS?
- Normal retirement age: 60 years (for All Citizens / Corporate NPS). Government employees follow their service retirement date.
- You have 3 years after turning 60 to initiate exit; corpus continues to be invested in the interim.
- You can defer exit and stay invested up to age 85.
- At maturity, purchase an annuity from a PFRDA-empanelled insurer and receive the lump-sum portion directly into your bank account.
- The annuity starts paying out as regular pension monthly, quarterly, or annually depending on the annuity plan chosen.
18. Can I have multiple NPS accounts?
No — an individual can hold only one PRAN (one Tier 1 NPS account) at any time. However:
- Your single PRAN is valid across all jobs, cities, and PoPs throughout your life.
- If you accidentally open a second PRAN, you must close one and consolidate contributions.
- You can have a Tier 2 account linked to your existing PRAN — this is not a separate account but an add-on.
- NPS accounts are completely separate from APY (Atal Pension Yojana) — having an APY does not count as a second NPS account.
19. How to check NPS balance and statement online?
Several ways to check your NPS account balance and statement:
- NPS portal: Login through NPS portal using PRAN + password ? Dashboard shows current value, NAV, and contribution history.
- eNPS mobile app: Download from Play Store / App Store — real-time balance, transaction history, contribution statement.
- SMS/email alerts: Register your mobile and email with NPS for auto-alerts on every contribution credited.
- Annual statement: Sent to your registered email every April; download any time from NPS portal ? "Transaction Statement."
- UMANG app: Link PRAN to check balance via the government’s UMANG platform.
These are the most common questions people have about NPS in 2026. The latest updates — like the higher withdrawal limit and more flexible options — give you better control over your retirement savings.