NPS lets you contribute during your working years to a mix of equity and debt, managed by professional pension fund managers. Your money grows until you turn 60, when part of the corpus is paid out and the rest buys an annuity that provides a monthly pension.
Its standout feature is an extra tax deduction. Beyond the ₹1.5 lakh Section 80C limit, NPS offers an additional ₹50,000 deduction under Section 80CCD(1B).
The trade-off is a lock-in until retirement and a rule that part of the maturity must buy an annuity. For a young investor, decades of compound interest on equity exposure can build a substantial retirement corpus.