NPS Tier 1 is a retirement account. It is the primary NPS account and you can only open a Tier 2 account after opening a Tier 1 account.
NPS Tier 1 account can be opened under the NPS (Central Govt), NPS (State Govt), NPS (Corporate) and NPS (All Citizens Models). Different rules apply to each, but the general rules stated below apply to all types of NPS Tier 1 accounts. You need to deposit at least Rs 1,000 per annum to keep the account active. The NPS Tier 1 account matures at the age of 60 and you can extend it till the age of 70.
NPS Tier 1 is eligible for tax deduction on contributions up to Rs 1.5 lakh under Section 80 C and an additional Rs 50,000 under Section 80 CCD (1B) of the Income Tax Act, 1961. On withdrawal, 40% of the NPS Tier 1 account balance can be withdrawn tax-free. Another 40% must be compulsorily used to buy an annuity (monthly pension). The remaining 20% can either be used to buy an annuity or can be withdrawn after paying tax (at your slab rate).
1.You have to be a citizen of India. NRIs can also open it as long as they are Indian citizens.
- You have to be between 18 and 65 years of age. Special rules apply if you open an NPS Tier 1 account from the age of 60 – 65.
Minimum Investment: Rs 1,000 per annum
Maximum Investment: No upper limit
Lock-in: Till you attain the age of 60
Returns: Depend on the asset allocation and pension funds chosen by you.
How to open an NPS Tier 1 account
If you have an Aadhar Card, PAN Card and bank account, you can open an NPS account online at enps.nsdl.com or enps.karvy.com. These are the portals of the Central Recordkeeping Agencies (CRAs) in the NPS. If you prefer to do this offline (in person) you can go to your nearest NPS Point-of-Presence (PoP) which is typically a designated branch of your bank. You can get a full list of NPS PoPs here.
In either case (online or offline account opening), you can make contributions, change key details, change fund managers and initiate withdrawals online at enps.nsdl.com or enps.karvy.com.