Types of NPS Accounts

If you want to create a resilient retirement fund for the future then is imperative to start planning for your retirement right from the time when you start earning. As there are many different retirement plan options available in the market, the government initiated the National Pension Scheme is one of the best options of investment to create a retirement corpus.

Read more
Best Pension Options
  • Get Tax Free Pension For Life

  • Flexibility to withdraw fund value any time

  • Guaranteed Tax Savings

    Under Sec 80 C & 10(10D)

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Invest ₹6,000/month & Get Tax Free Monthly Pension of ₹60,000

Get the best returns & make the most of your Golden years

+91
View Plans
Please wait. We Are Processing..
Plans available only for people of Indian origin By clicking on "View Plans" you agree to our Privacy Policy and Terms of use #For a 55 year on investment of 20Lacs #Discount offered by insurance company Tax benefit is subject to changes in tax laws
Get Updates on WhatsApp

Tax efficiency, low-cost structure, and investment flexibility have made NPS a popular investment choice for retirement planning. As a government-initiated investment option, NPS is one of the safest investment products available in the market and is specially designed to ensure the financial security of Indian residents post-retirement. There are two different NPS account available i.e. Tier I and Tier II account. let’s read further to understand it in detail.

NPS Calculator

Your Age

18 Years 59 Years
Enter Your Age

Investment Per Month

₹500 ₹10L
Enter Investment Per Month

Expected Return on Investment

5% 20%
Expected Return on Investment
Total Investment
Interest Earned
Maturity Amount

Percentage of Corpus to be allocated for Purchase of Annuity

40% 100%
Enter Corpus Percentage

Expected returns from the Annuity

3% 10%
Enter Annuity Return
Lumpsum Amount
At age of 60 Yrs
Yearly Pension
For life time

What is NPS Tier I Account?

NPS Tier I  account is a mandatory account. While opening NPS Tier I account the subscriber gets a Permanent Retirement Account Number (PRAN). To open the account you will need to make a minimum contribution of Rs.500. The minimum contribution limit for the Tier I account is Rs.1000 per annum, whereas, there is no limit on maximum contribution towards the NPS account. The accumulated fund is locked in until you turn 60 years of age. To open a Tier I account, the individual should fill in the right information along with the required document while filling up the registration form.

What is NPS Tier II Account?

NOS Tier II account is a voluntary account that can be opened only if the individual has the Tier I account.  Tier II account has flexible exit and withdrawals rules. Even though both the accounts work almost similar there are certain differences. To open a Tier II account one should make a minimum contribution of Rs.1000. Moreover, the contribution made towards the Tier II account does not qualify for tax exemptions. The fund management charges and investment choice in the Tier-II account are the same as the Tier I account.

Key Highlights of NPS Scheme

  • All Indian citizens between the age group of 18-60 years can open the NPS account.
  • The maturity age of the scheme is 60 years, which can be further extended up to 70 years.
  • The current interest rate applicable to the investment done in the NPS account is 9%-12%.
  • The NPS benefit also includes tax exemption U/S 80C of the Income Tax Act up to the maximum contribution of Rs.1.5 lakh made towards the NPS.

Let’s take a look at the top 5 reasons why NPS should be a part of your retirement planning.

  • Dual Benefit of Power of Compounding and Low Cost

    NPS is one of the most affordable pension investment products available in the market. An individual can start investing in the NPS scheme with a minimum contribution of Rs.500 for the Tier-I account and Rs.250 for the Tier-II account and can invest up to a maximum of Rs.6000 in a financial year.  Moreover, the investment made towards the NPS scheme is multiplied in the long-term with the benefit of the power of compounding and helps to create a strong financial cushion for a secured life after retirement.

  • Interest/Returns

    A part of the investment made towards the NPS scheme is invested in equity securities, which offers profitable returns as compared to the other tax-saving option of investment like PPF. The scheme offers an interest rate of 9%-12% and is best suitable for individuals who want to gain a high return on investment and create wealth in the long-term.

  • Flexibility

    NPS offers flexibility, as you can choose your pension fund and investment option and see your capital grow. Also, you can switch the asset class and investment option twice a year and can change your pension fund once a year. As per the rule of the equity allocation, you can allocate a maximum of 50% of the investment in equity securities. Moreover, NPS also offers you two different choice to invest in your account i.e.

    • Active Choice- In this option, you can select the allocation percentage in the asset classes.
    • Auto Choice- In this option, the funds are automatically allocated among the different asset classes in a pre-defined time- period as per the age of the subscriber.
  • Tax Benefit

    NPS scheme also offers tax benefits the same as PPF and EPF. NPS offers tax benefits under the EEE rule i.e. exempt, exempt, exempt. Under this rule, the investment made in the scheme, the interest earned on the contributed amount, and maturity proceeds are all applicable for tax exemption Under Section 80C of the Income Tax Act. NPS also offers additional tax benefits on the contribution of Rs.50,000 over and above the investment in the NPS account. Thus, you can claim a total tax exemption of Rs.2 lakh.

  • Assured Annuity Amount

    After the maturity of the NPS scheme, you can withdraw only 60% of the accumulated fund from the account after retirement. However, it is mandatory to purchase the annuity from the rest 40% of the accumulated fund. You can select the annuity service provider at the time of submitting the withdrawal request and after the payment of the lump-sum withdrawal.

    The amount of annuity depends on the annuity purchase amount & tenure of the annuity policy. The annuity purchased by you ensures a regular flow of pension income after retirement. As per the information available on NSDL, the minimum age of receiving the annuity is predefined by the Annuity Service Provider (ASP).

Wrapping it UP!

With the above-mentioned reasons, it is justified now why you should invest in the NPS scheme to create more resilient retirement planning.

Types of NPS Account FAQs

  • What are employee specific benefits of an NPS account?

    Investors who regularly contribute to NPS scheme enjoy additional tax benefits. If you contribute to the scheme, you are eligible for the following deductions:
    • For employee’s contribution: Up to 10% of your salary (Basic + DA) under section 80CCD (1) with a cap of Rs 1.5 lakhs per annum
    • For employer’s contribution: Up to 10% of your salary (Basic + DA) contributed by the employer under section 80CCD (2) with a cap of Rs 1.5 lakhs per annum
  • What benefits NPS offers to a self-employed individual?

    Self-employed individuals contributing to the NPS scheme also enjoy additional tax benefits. If you fall under this category, you can claim deductions up to 10% of your gross income under section 80CCD (1). In addition to this, you will also be eligible for tax deductions up to Rs 50,000 for all your additional contributions to the scheme.
    However, you must check final tax rates for deduction while filing taxes.
  • What are transactional charges of an NPS account?

    Description Charges (Rs)
    Registration charge Rs 200 (excluding taxes)
    0.25 % of the contribution amount (subject to minimum Rs 20 and maximum Rs 25,000) – tax not included
    All service charge Rs 20 (excluding taxes)
    Payment mode specific Cheque, DD, and Cash payments subject to realization
  • Can NRIs open an NPS account?

    Yes. All Non-Resident Indians are eligible to open an NPS account. However, contributions made by an NRI are subject to RBI and FEMA regulatory requirement. 
    You must note that PIOs and OCI card holders are not eligible to make any NPS contributions. HUFs are also not eligible to open an NPS account.
  • Can I open an NPS account jointly with my spouse or children?

    No. Joint account opening facility is not available for NPS accounts. Besides, joint operations of the account are also not available for and by HUFs.
Best Endowment Plans
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
Retirement Plans
Monthly Pension Plans
Higher Returns Than Fixed Deposit
Retirement Calculator
Retirement Calculator
How much do you need to save for retirement?
₹ 20,000
₹ 25,000
₹ 30,000
Monthly Expenses in 2022
Edit Done
Your expense go up every year by
Today 2022 Your expenses today in 2022, at the age of 34 Yrs
Your expenses in 2043, at the age of 55 Yrs
For a monthly pension of ₹77,300
you need to invest
₹14,300/month
Calculated as per past performance of 15%
View Plan Recalculate?

Pension plans articles

Recent Articles
Popular Articles
How to Get a 50K Pension Per Month?

15 Jun 2022

Retirement planning should form an essential part of your...
Read more
NPS Premature Withdrawal

15 Jun 2022

The National Pension Scheme is the Central Government’s social...
Read more
Get 30K Pension Per Month

15 Jun 2022

Planning retirement is extremely important and crucial these...
Read more
Atal Pension Yojana Premium Chart

08 Jun 2022

Atal Pension Yojana (APY) is a government of India initiative to...
Read more
Monthly Pension Scheme for Senior Citizens

02 Jun 2022

Retirement planning is paramount to creating a constant source...
Read more
National Pension Scheme (NPS) – Govt Approved Pension Scheme
National Pension Scheme (NPS) is an investment cum pension plan launched by the Indian Government. This scheme is...
Read more
NPS Calculator - National Pension Scheme Calculator Online
National Pension Scheme Calculator is an online tool, which allows the individual to calculate the estimated...
Read more
Saral Pension Yojana
In India, there are various individual immediate annuity products offered by life insurance companies. These...
Read more
Post Office NPS Calculator 2022
National Pension System is a scheme launched by the Government of India that offers stability to all Indian...
Read more
Top Pension Plans in India
Pension plans are one of the most sought-after investment options that have gained huge popularity over the...
Read more
top
Close
Download the Policybazaar app
to manage all your insurance needs.
INSTALL