Planning for retirement is akin to nurturing a sapling. It takes considerable time for the seedling to morph into a tree and for you to reap its many benefits. The National Pension System (NPS) is a retirement-specific investment plan that gives your regular pension in your retirement years. What's more, you can also reduce your tax liabilities with NPS investments.

1. National Pension System

2. What is NPS
The National Pension System is a pension scheme
regulated by the Pension Fund Regulatory and
Development Authority of India (PFRDA). It was initiated
by the central government in 2004 for people to invest
and reap returns for retirement.

3. How NPS Works?
NPS is a market-linked pension account in which you can
make regular contributions till you retire. These
investments are managed by professional fund
managers. At age 60, you can withdraw 60 per cent of the
corpus and remaining 40 per cent to buy an annuity
which generate regular income after retirement

4. Account Types in NPS
The NPS offers two different account types:
Tier I NPS Account
Tier II NPS Account

5. Difference between Tier 1 and Tier 2 Account

6. Benefits and Features of NPS account
1: Returns: For Tier I accounts, the minimum amount per
contribution is ₹500. Moreover, you have to make a
contribution of at least ₹1,000 in a financial year. There is no
limit on the number of contributions in a financial year if you
are a Tier I account subscriber. For Tier II accounts, the
minimum amount per contribution is ₹250. There is no
minimum balance requirement.
2: Flexibility: You can change your fund manager if you are
unhappy with the fund's performance. You will have to fill up
a form for a fund manager change request.

7. 3: Risk - returns stabilisation: The risk factor posed by
equity market volatilities is softened in the long run.
4: In NPS, you have the option of being an active investor
and monitoring your investment and deciding how and
where it should go.On the other hand, the automatic
option allows the scheme to divide your funds
appropriately through the 'auto' mode, based on your age
and other defining factors.

8. Tax Benefits of Investing in NPS
Under Section 80CCD of the Income Tax Act, you can
claim deductions against your contributions to the
National Pension System or Atal Pension Yojana. Tax
deductions under Section 80 CCD (1) are available to all
individuals irrespective of whether he/she is employed at
a government or private organisation or is self-employed.