What is an NPS Tier I Account?
The Tier I account is the primary NPS account and is mandatory for all subscribers. Upon opening this account, you're issued a Permanent Retirement Account Number (PRAN).
To open a Tier I account, you'll need to submit accurate details along with the necessary documents in the registration form.
The Key features of the Tier I Account are:
- Minimum contribution: You will need to contribute ₹ 500 per contribution; the minimum contribution you can make per year is ₹ 1000.
- Lock-in Period: The funds are locked in until you turn 60 years of age.
- Tax Benefits: The tax benefits are eligible under sections 80C and 80CCD of the Income Tax Act
- Account Opening Requirements:
- A properly filled registration form
- Valid KYC (know your customer) documents
- Your initial contribution
What is an NPS Tier II Account?
The Tier II account is optional and accessible only to existing Tier I subscribers. While it offers similar investment choices and fund charges as Tier I, it doesn't offer tax benefits.
The key features of the NPS Tier II Account are:
- Minimum Contribution: You will need to make a contribution of ₹1000 at the time of opening; no minimum transaction afterwards.
- Withdrawals: The withdrawals are flexible and are permitted at any time.
- Tax benefits: There are no tax benefits in this account.
- Investment options: The investment options are the same as those of the Tier I account, including government bonds, equity, and corporate bonds.
- Fund management charges: The charges are 0.01% per annum, the same as Tier I
Wrapping it Up
With its structured investment framework, investing in the NPS system is a cost-effective step towards building a secure and resilient retirement plan. Whether you're an employee on a payslip or self-employed, NPS offers a perfect mix of tax savings, long-term wealth creation, and flexibility.
In 2025, the scheme continues to grow with technological tools, better savings performance, and financial awareness among investors. Stay consistent and let the power of investing work in your favour. If financial stability is your goal, NPS is one of the smartest choices you can make today.