The National Pension System (NPS) is a government-sponsored retirement savings scheme in India, designed to provide financial security during old age. Launched in 2004, it aims to encourage systematic savings among citizens and offers attractive tax benefits.

NPS operates on a defined contribution basis, where individuals contribute regularly during their working years. These contributions are invested in various asset classes such as equities, bonds, and government securities, managed by professional fund managers appointed by the Pension Fund Regulatory and Development Authority (PFRDA).

One of the key features of NPS is its flexibility, allowing subscribers to choose between various investment options and pension fund managers based on their risk appetite and investment preferences. Additionally, NPS offers two types of accounts: Tier-I, which is a mandatory pension account with restrictions on withdrawals, and Tier-II, which is a voluntary savings account with no withdrawal restrictions.

Subscribers to NPS can avail of tax benefits under Section 80CCD of the Income Tax Act, where contributions up to a certain limit are eligible for deduction from taxable income. Furthermore, NPS provides an option for partial withdrawal for specific purposes like education, medical treatment, or home purchase, subject to certain conditions.

Upon retirement, subscribers can withdraw a portion of their accumulated corpus as a lump sum, while the remaining amount is utilized to purchase an annuity that provides a regular pension income. The NPS thus serves as a crucial tool for individuals to plan for their retirement and ensures financial stability in their golden years.