Types of NPS Accounts

Tier-1 Account

It is a mandatory account you get when you start your NPS policy. Most of the NPS benefits are exclusive to tier-1 accounts.

Minimum Investment

₹500 is needed to open an NPS tier 1 account. You must invest at least ₹1000 per year to keep the account active.

Tax Benefits of Tier 1 Account

Annual contributions up to ₹2 lakhs are eligible for 80C deduction, including ₹50,000, which can be claimed under Section 80CCD (1B).

Withdrawals

At 60, you can withdraw 60% of your corpus. The remaining gets converted to an annuity to receive a pension for the rest of your life.

Withdrawal Tax Benefit

NPS tier 1 60% corpus withdrawal is exempt from tax, making it an extremely tax-friendly option.

Documents Required for NPS Tier I

Aadhaar Card Netbanking details Passport size photograph (size 4-12 kb) Scanned image of signature PAN Card

Tier 2 Account

This account is voluntary and available to all NPS tier I users with flexible withdrawal rules who want a secondary investment account.

No KYC Requirement

Since you need to submit all the KYC documents for the tier 1 account, there is no KYC submission is required for the tier 2 account.

Minimum Investment

The minimum initial investment required to open a Tier 2 account is ₹1000. You can choose not to contribute yearly to the Tier 2 account.

No Withdrawal Limits

There are no withdrawal limits set on this account. You can invest in & withdraw from an NPS tier 2 account anytime.

Limited Tax Benefits

Since Tier 2 Account is not mandatory, it doesn’t include tax benefits for non-government employees.

Should You Invest?

NPS is one of the most beneficial retirement schemes as it invests in equities. If you are a risk-averse investor, you can also choose low-equity options.

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