National Pension Scheme (NPS) is a voluntary contribution pension scheme. In 2004, when it was launched, it was only meant for government employees as defined pension benefits were lifted for employees who joined after 1 January 20014. It was later opened to all citizens in India, including self-employed individuals in 2009.

NPS is a tax efficient retirement savings instrument that has exemptions under section 80C, 80CCC and 80CCD(1) of the Income Tax Act.

1. Out of the subscriber's own contribution, he/she is eligible for a tax deduction of up to 10 percent of the salary (basic+ Dearness Allowance) under Section 80CCD(1) of the Income Tax Act. It has to be within the overall ceiling of Rs 1.5 lakh allowed under Section 80C and Section 80CCE. In case of non-salaried individuals, 10 percent of the gross total income for the financial year is eligible for exemption.
2. The employer's co-contribution to NPS is exempt up to 10 percent of the salary (basic+DA) under Section 80CCD (2) in the hands of the employee.
3. Additionally, after budget 2016, subscribers can claim a deduction of up to Rs 50,000 under Section 80CCD (1B) over the limit of Rs 1.5 lakh under Section 80C for contribution towards NPS.