NPS stands for the National Pension System, which is a voluntary pension scheme introduced by the Government of India. It is a defined contribution pension system that aims to provide retirement income to individuals working in the organized sector, including employees of government, private sector, and unorganized sector workers.

Here are some key points to understand about the National Pension System (NPS):

• Objective: The primary objective of NPS is to provide financial security and regular income to individuals during their retirement years.
• Contribution: NPS is a contribution-based system, where individuals make regular contributions towards their pension account during their working years. Both the employee and the employer contribute to the pension account, with the employee's contribution being mandatory and the employer's contribution being optional.
• Tier Structure: NPS has a two-tier structure:

a. Tier I Account: This is a mandatory account with strict withdrawal restrictions. The contributions made to this account are not readily withdrawable until retirement age (currently set at 60 years). However, partial withdrawals are allowed under specific circumstances, such as for higher education, medical treatment, or buying a house.

b. Tier II Account: This is an optional account that offers more flexibility in terms of withdrawals. The contributions to this account can be withdrawn anytime without any restrictions.

• Investment Options: NPS offers different investment options to choose from, known as Pension Fund Managers (PFMs). Individuals can select the PFM of their choice, which manages their pension contributions and invests them in various asset classes, such as government securities, corporate bonds, and equities. The investment choice can be conservative (more towards fixed income) or aggressive (with exposure to equities).
• Tax Benefits: NPS offers tax benefits to encourage retirement savings. Contributions made by employees towards their Tier I NPS account are eligible for tax deductions under Section 80CCD(1) of the Income Tax Act, subject to specified limits. Additionally, an exclusive deduction is available for contributions made by employers under Section 80CCD(2). At the time of retirement, a portion of the accumulated corpus can be withdrawn tax-free, while the remaining portion is utilized to purchase an annuity, which provides a regular pension income.
• Portability: NPS is a portable scheme, meaning an individual can continue the same NPS account even if they change jobs or locations. The NPS account remains with the individual throughout their working life, ensuring continuity in pension contributions and benefits.
• Regulated by PFRDA: The National Pension System is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), which sets the guidelines and rules for the scheme's operation and monitors the Pension Fund Managers.

NPS offers a long-term retirement-focused savings option with potential tax benefits and investment flexibility. Individuals interested in joining NPS can approach Point of Presence (POP) banks, which act as intermediaries for account opening and contributions. It's advisable to review the NPS rules and consult a financial advisor or tax consultant to understand the scheme's intricacies and determine its suitability based on individual financial goals and circumstances.