NPS or National Pension System is a pension scheme introduced by the government of India. PFRDA (Pension Fund Regulatory and Development Authority) manages and regulates this scheme. This scheme is helpful in creating retirement corpus for the individuals especially for those who do not have any source of income after their retirement. Any Indian citizen (whether resident or NRI), aged between 18 & 65 years, is eligible to invest in NPS.
National Pension Scheme (NPS) offers two types of accounts Tier I and Tier II. The features of both the accounts are given below:
Majority of people do not know what is the meaning and difference of Tier 1 and Tier 2 Accounts of NPS. Given below is the table showing the difference between Tier I Account and Tier II Account of NPS:
| Basis of Difference | Tier I | Tier II |
|---|---|---|
| Account Status | Mandatory | Voluntary |
| Prerequisite | N.A. | Necessary to have active Tier I account |
| Who can open | Indian Citizen (Resident or NRI) | Member of NPS Tier I account |
| Tax Exemption | Up to Rs 2 Lakh (u/s 80C & 80CCD) | Up to Rs 1.5 Lakh (for govt. employees) |
| Minimum Contribution while opening of NPS | Rs. 500 | Rs. 1000 |
| Minimum Subsequent Contribution Amount | Rs. 500 | Rs. 250 |
| Minimum number of contributions required in a year | 1 | Nil |
| Minimum Annual Contribution | Rs. 1000 | Nil |
| Maximum Contribution | No Limit | No Limit |
| Withdrawal | Allowed with limitations | Allowed without any restriction |