What are the types of NPS accounts and their features, differences, tax benefits, and withdrawal rules?

NPS (National Pension System) offers two types of accounts: Tier I and Tier II.


Tier I Account:


  • Features: Mandatory retirement account with tax benefits.
  • Tax Benefits: Offers tax deductions.
  • Withdrawal Rules: Restricted until retirement, with specific conditions for partial withdrawals.
  • Minimum Contribution: ₹500 annually.


Tier II Account:


  • Features: Voluntary savings account with no withdrawal restrictions.
  • Tax Benefits: Does not offer tax deductions.
  • Withdrawal Rules: Flexible withdrawals at any time.
  • Minimum Contribution: ₹250 for each transaction.


Key Differences:


  • Tax Benefits:Tier I has tax benefits, Tier II does not.
  • Flexibility: Tier I has restrictions on withdrawals; Tier II allows flexible withdrawals.


You can hold both Tier I and Tier II accounts simultaneously. To switch between accounts, maintain contributions in Tier I and use Tier II for additional savings.

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