Equities offer higher returns than other conventional tax-saving investment options like PPF, hence a portion of the contribution made to the NPS plan is invested in them. This pension plan, which has an interest rate of 9% to 12%, is most ideal for people who desire to save money over the long term and have stable lives after retirement.

This is yet another perk provided to users of NPS. Section 80C of the Income Tax Act allows for the tax exemption of contributions made to the NPS programme up to a maximum of Rs. 1.5 lakhs. Additionally, both the employer and employee contributions to the National Pension Scheme are eligible for tax exemption.

Investments in the National Pension Scheme must be made until age 60 as a requirement for a pension plan. However, after three years from the account's opening date, partial withdrawals are permitted. The maximum amount that subscribers may remove from their contributions is 25%. Premature withdrawal is only permitted in certain situations, such as when paying for a child's education, buying a home, or in the event of a medical emergency. In the course of the tenure, subscribers may withdraw money up to three times at intervals of five years. Only the Tier I account is subject to these regulations; the Tier II accounts are not.

In the NPS plan, the retiree is not permitted to take out their whole account balance at retirement. For the purpose of receiving a regular annuity from the PFRDA-registered insurance company, it is necessary to set aside at least 40% of the total accrued fund under this scheme. Taxes are not due on the remaining 60% of the accumulated fund.

Investments are made into a distinct system under the NPS programme. According to the equity allocation guideline, investors may invest up to 50% of their money in stocks. Active choice and auto choice are the two investment alternatives that are accessible. In contrast to auto choice, which makes investments based on the risk profile and age of the investors, active choice gives investors the freedom to select their funds and divide their investments according to their risk tolerance and suitability.

There is now a cap on the equity exposures of the NPS plan that ranges from 75% to 50%. The ceiling for government workers is set at 50%. Starting the year the investors turn 50 years old, the equity component will decrease by 2.5% annually within the prescribed range. As a result, the risk-return equation for investors is balanced, protecting the invested funds from the volatility of the equity market. Compared to other fixed-income plans, this one has a better earning potential.