If you are not want to face financial crunch after retirement or old age and save money to safe and secure future so there is a tax saving investment are available to individual assessee. Under section 80CCD of Income Tax Act, it provides deduction in respect of investment in Pension Fund by an individual under National Pension Scheme (NPS). This section 80CCD provides benefit to all individual assessee means employee and self employed person, both are eligible for claiming deduction under this section.

NPS is regulated by Pension Fund Regulatory & Development Authority (PFRDA). The scheme is structured into two types of accounts:
It includes savings for post retirement. You cannot allow withdrawal money from this scheme before maturity

And second one is a voluntary savings account. In this you may withdrawal money in unusual reasons only, prior to the retirement age.
There is also a two way to take deduction under this section-
Contribution made by self Under Section 80CCD (1) of Income Tax Act
Contribution made by employer Under Section 80CCD (2)
CONTRIBUTION MADE BY SELF UNDER SECTION 80CCD (1)
Under this section, deduction is available for your own contribution in NPS.  It means, an individual (Employee or self employed) can claim deduction for the investment made by him to the NPS scheme. You can also read about tax saving fixed deposits which are safe and quite similar to NPS and gives healthy return

Maximum amount allowed as deduction under section 80CCD (1) is lower of-
Amount deposited by you in your account;
OR
“10% of salary in case of individual being an employee” or “10% of GTI in case of any other individual”

CONTRIBUTION MADE BY EMPLOYER UNDER SECTION 80CCD (2) of Income Tax Act
Under this section, deduction is available for his employer contribution in him account under NPS. It means, an individual (Employee) can claim deduction for the investment made by his employer in him account under NPS scheme. This deduction is in addition to U/s 80CCD (1) deduction means deduction 80CCD is sum of allowable deduction under 80CCD(1) and 80CCD(2). Deduction under section 80CCD (2) is not allowed to self employed individual because there is no any employer-employee relationship exist.
Maximum amount allowed as deduction under section 80CCD (2) is lower of-
Amount deposited by your employer in your account;
OR
“10% of salary, being an employee”
One More thing is to be noted, Contribution made by employer under section 80CCD (2) firstly included in salary of the employee in previous year in which that contribution is made by the employer.
Other than above limit, maximum deduction allowed under this section is Rs. 1 lacs. This 1 lacs limit is club with deductions under section 80C, 80CCC and 80CCD. Maximum deduction under these three sections is limited to One lacs. Any amount claimed as deduction under this section than no deduction shall be allowed under section 80C.
For the purposes of this section, salary includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites. Do you know other best tax saving options for salaried professionals?

TAXABILITY OF AMOUNT RECEIVED FROM PENSION FUND
This section is on phenomena of TET means at the time of received of income is taxable, when it invested it is exempt and at the time of received of that amount it is Taxable also.

If any amount has earlier been allowed as deduction under section 80CCD(1) OR 80CCD(2) of Income Tax Act which the individual himself or his nominee receives at the time of retirement or in case the employee decides to opt out of pension scheme, such amount shall be treated as the income of the year in which it is received.
This accumulated amount of pension received is totally exempt from tax. But claiming this exemption also has an implied condition. An individual can withdraw up to 60% of the total amount at the time of retirement and remaining 40% of the amount is to be used to invest in some annuity plan. Earlier, we showed how to become double crorepati in 20 years.
This means individual can save tax on the whole amount invested and will later have to pay tax on the later received annuity whose tax rate is much lower than the normal tax rate.