Your contributions are invested in a mix of equity, corporate bonds and government bonds. Under the old regime you can claim an extra deduction of up to ₹50,000 a year beyond 80C, and employer contributions are deductible in both regimes within limits. At retirement, part of the corpus can be withdrawn tax-free and the rest is used to buy an annuity, under rules set by the PFRDA.
Finance glossary
What is National Pension System (NPS)?
A low-cost, market-linked retirement scheme regulated by the PFRDA, open to most Indian citizens.