The Indian government offers several pension schemes to provide income security for citizens after retirement.
Among them, the National Pension Scheme (NPS) and Atal Pension Yojana (APY) have been making news — together, they now have over nine crore subscribers and more than ₹16 lakh crore in assets, as of October 2025.
Both schemes are regulated by the Pension Fund Regulatory and Development Authority (PFRDA) and offer different benefits depending on your income, employment type, and goals.
Let’s break down what makes each one unique.
National Pension Scheme (NPS): Market-Linked Retirement Savings
Launched in 2004, the NPS is designed to help individuals build a retirement corpus through market-linked investments.
It’s mandatory for central government employees, but open to all citizens on a voluntary basis.
Currently, 39 states and Union Territories have adopted it for their employees.
Two Account Options
Tier I Account: A mandatory retirement account with limited withdrawal options.
Tier II Account: A voluntary savings account with flexible withdrawals. You need an active Tier I account to open this.
Anyone between 18 and 70 years can join the NPS.
You can start with as little as ₹500, and you must maintain a minimum of ₹1,000 per year.
Withdrawals and Returns
At age 60, you can withdraw up to 60% of your savings, while the remaining 40% is used to buy an annuity for monthly pension.
Partial withdrawals (up to 25%) are allowed after three years.
PFRDA has also proposed allowing withdrawals after 15 years instead of waiting till 60.
Investors can choose between Active and Auto investment options, deciding how their money is split among equity, debt, and government securities.
Returns typically range between 8–12% annually, depending on the portfolio.
Tax Benefits
Up to ₹1.5 lakh deduction under Section 80C.
Additional ₹50,000 deduction under Section 80CCD (1B).
Employer’s contribution is also tax-deductible (up to 10% of basic salary, or 14% for central government employees).
However, there are no tax benefits on Tier II accounts for private individuals.
How to Apply
Individuals can open an NPS account online via the National Pension System portal or through banks.
After verification, you’ll receive a Permanent Retirement Account Number (PRAN) card and welcome kit.
Atal Pension Yojana (APY): Guaranteed Pension for the Unorganized Sector
The Atal Pension Yojana, launched in 2015, is meant for people working in unorganized sectors who don’t have access to other social security benefits.
As of May 2025, APY has over 7.65 crore subscribers.
However, since October 2022, income-tax payers are not eligible to open a new APY account.
Who Can Join
Anyone aged 18–40 years can open an APY account through their bank or post office.
The account can also extend benefits to a spouse and nominees.
Contributions and Returns
Subscribers can choose a pension amount ranging from ₹1,000 to ₹5,000 per month, with contributions adjusted by age.
Payments can be made monthly, quarterly, or half-yearly.
The government co-contributes up to 50% of the total investment (up to ₹1,000 per month) for eligible subscribers.
Early withdrawals include accrued interest after deducting maintenance charges.
Tax Benefits
Subscribers can claim deductions under Section 80CCD(1).
How to Apply
You can register online via the NPS portal or visit your nearest bank or post office.
After verification, you’ll receive a PRAN card for account management.
The Bottom Line
Both NPS and APY aim to secure your financial future — the key difference is in who they serve.
NPS suits those seeking market-linked growth and flexible investment options.
APY is ideal for low-income individuals looking for a fixed pension backed by the government.
Choosing the right one depends on your income, age, and risk appetite — but either way, you’re investing in a more secure retirement.
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