An annuity in NPS refers to the monthly sum received by the subscriber from the Annuity Service Provider (ASP) after their exit from the National Pension System (NPS) . An annuity is a type of investment that offers regular dividend payments for a stipulated time or life. In the context of NPS, 40% of the total NPS corpus remains invested in annuity. The remaining 60% of the corpus is taxable, and 40% of it is tax-exempt as it has to be compulsorily used to purchase an annuity. The annuity income will be taxed, though. The annuity scheme in the national pension system can help retirees by providing them with a steady income after retirement, which can be a great thing for many retirees. Annuities have a steady rate of interest on reinvestment, which means that the reinvestment risk on annuities is eliminated. NPS gives subscribers the flexibility to choose from different annuity options, depending on their requirements. The annuity schemes available for subscribers if they take annuity on retirement include the Default Annuity Scheme, which provides for annuity for the life of the subscriber and their spouse (if any) with a provision for the return of the purchase price of the annuity. In case of death, the nominee or the legal heir can withdraw 100% of the corpus.