Two accounts: Tier I and Tier II
Tier I is the core retirement account — it has a lock-in until retirement age and specific withdrawal rules, and it carries the tax benefits. Tier II is a voluntary, flexible add-on with no lock-in but generally no extra tax benefit — an optional companion.
How your money grows
You choose how contributions are split across equity, corporate bonds and government securities — either actively (you set the mix, within limits) or via an auto choice that gets more conservative as you age. Professional pension fund managers run the schemes at very low cost.
Tax angle and getting started
NPS offers deductions under Section 80C and an additional deduction specifically for NPS beyond the 80C limit (under the old regime). At retirement, a portion can be withdrawn and the rest buys an annuity for regular income. Exact limits change — confirm the current ones. You can open an NPS account online with PAN, Aadhaar and bank details.
FAQs
Tier I is the main retirement account with a lock-in and tax benefits. Tier II is a voluntary, withdraw-anytime account without the additional tax benefit.
Yes. You can actively set the split across equity, corporate bonds and government securities within regulatory limits, or use the auto choice that adjusts with age.
A portion of the corpus can typically be withdrawn as a lump sum and the remainder is used to purchase an annuity for regular income. Rules can change — verify current limits.
Educational content for general awareness only — not investment, trading or tax advice. Investments in securities market are subject to market risks; read all related documents carefully. Rules and rates are indicative for FY 2025-26 and may change.