By Hemant Sharma Financial independence for women in India increasingly goes beyond today’s paychecks—it’s about ensuring freedom and dignity even after active work years. Yet, many women still overlook long-term retirement planning due to career breaks, caregiving duties, and irregular income patterns.
The National Pension System (NPS), a government-backed, low-cost, flexible, and portable retirement scheme, offers a disciplined and tax-efficient path to build a stable retirement corpus.
Why Do Women Need Dedicated Retirement Planning?
- Longer Life Expectancy: Women in India, on average, live longer than men. According to World Bank data, life expectancy at birth for women in India is higher compared to men. However, the COVID-19 pandemic has impacted these figures. A study by the International Institute for Population Sciences (IIPS) revealed that life expectancy for women declined by 0.5 years in 2021, from 72.1 years in 2019 to 71.6 years in 2021. In contrast, men’s life expectancy dropped by 2.2 years during the same period.
- Career Interruptions: Breaks for maternity, caregiving, or other personal reasons often reduce lifetime savings and slow corpus growth. These interruptions can lead to lower lifetime earnings, affecting the amount available for retirement savings.
- Inflation Factor: The rising cost of living makes it critical to have a plan that ensures income growth in retirement. Inflation erodes purchasing power, making it essential to invest in instruments that offer returns above inflation rates.
NPS offers a structured approach to address these unique challenges.
How NPS Works for Women?
Government-backed and low-cost: More of each contribution is invested, helping wealth grow over the long term. NPS is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), ensuring transparency and security.
Flexible investment approach:
NPS provides various investment options across different asset classes:
- Government Bonds (G)
- Corporate Debentures (C)
- Equities (E)
- Alternative Investment Funds (A)
There are three Life Cycle Fund Options for Auto Choice based on risk tolerance:
- Life Cycle 75 – High
- Life Cycle 50 – Moderate
- Life Cycle 25 – Low
- Life Cycle Aggressive
Portable across employers and geographies: Women can maintain continuity in their savings despite career shifts or breaks.
Supportive during career pauses: Even if contributions stop temporarily (e.g., during maternity breaks), the account stays active and continues to compound.
Tax Benefits that Strengthen Retirement Planning
- Section 80C: Deductions up to ₹1.5 lakh per year on contributions. (under the old regime)
- Section 80CCD(1B): Additional deduction up to ₹50,000 over and above the 80C limit (under the old regime).
- Section 80CCD (2): Employer contribution deductible—up to 10% of salary (basic + DA) under the old regime and up to 14% under the new regime; subject to the overall ceiling of ₹7.5 lakh. For government employees, the employer’s contribution is deductible up to 14% under both regimes.
At retirement: Up to 60% of the accumulated corpus can be withdrawn as a lump sum, which is exempt from tax under Section 10(12A).
Annuity income: The remaining minimum 40% of the corpus must be used to buy an annuity, and pension received from this annuity is taxable as per the subscriber’s applicable income-tax slab.
Withdrawal & Exit Rules Important for Women
- At superannuation (age 60): Up to 60% of the corpus can be withdrawn tax-free; at least 40% must be used for annuity purchase.
- Premature exit (before 60 but after 5 years): 20% can be withdrawn as a lump sum; 80% must go to annuity. If the total corpus is below ₹2.5 lakh, the entire amount can be withdrawn.
- Partial withdrawals: Allowed after three years, up to 25% of self-contributed corpus, for specified purposes such as children’s education, healthcare, marriage, or first-home purchase. These withdrawals are exempt from tax.
Note: The withdrawal is limited to 25% of the subscriber’s own contributions, excluding employer contributions. Additionally, only three partial withdrawals are permitted during the tenure of the NPS account.
Steps to Open an NPS Account
- Register online through the eNPS portal or at the nearest Point of Presence (PoP) such as a UTI Pension Fund branch.
- Provide KYC documents (Aadhaar and bank details).
- Make the initial contribution (minimum ₹500 for Tier I).
- Receive the Permanent Retirement Account Number (PRAN) kit by post after processing.
Women can start contributing any time between ages 18 and 70.
Why is NPS a Smart Choice for Women in 2026?
- Tailored for long-term retirement security with market-linked growth and professional fund management.
- Cost-effective, ensuring a higher proportion of each contribution is invested.
- Flexible and portable, matching the realities of modern women’s work and life transitions.
- Provides significant tax savings under prevailing income-tax rules.
- Helps women build a disciplined corpus for lifetime financial independence.
Conclusion
For women in India, retirement planning is an essential step towards lasting financial independence. With its mix of low cost, flexible investment options, portability, and attractive tax benefits, NPS serves as a strong foundation for a secure future. Opening an NPS account early and staying consistent with contributions ensures that financial freedom today extends into the retirement years.