Both NPS contributions and NPS withdrawals enjoy tax benefits. Tax benefits under Section 80C can be availed up to Rs. 1.5 lakh per year. Exemption for additional Rs. 50,000 can be claimed under Section 80CCD (1B).Premature withdrawal (up to 25%) after completion of 3 years is exempted from tax. Lump sum withdrawal at the time of maturity is exempted from tax under Section 10 (12A). The investment in the annuity is tax-free under Section 80CCD(5). However, the income earned through the annuity is taxable as per the applicable income tax slabs.