What is Tier I and Tier II National Pension Scheme?
Tier 1 and Tier 2 are NPS rigid retirement plan. The bellow are difference and similarities
Tier I - National Pension Scheme
Eligibility : Any Indian citizen between 18 & 65 years of age
Lock-in : Till the age of 60 years
Minimum number of contributions in year : 1
Minimum contribution for account opening : Rs 500
Minimum amount for subsequent contribution : Rs 500
Minimum number of annual contributions : 1
Tax benefits on contribution : Contribution to NPS Tier I qualify for tax deduction under Section 80C up to Rs 1,50,000. Tax deduction is available under Section 80CCD (1B) up to Rs 50,000 in addition to Section 80C benefits. The contributions of up to Rs. 2 lakhs made towards the NPS account are eligible for tax exemptions under section 80C of The Income Tax Act, 1961.
Taxation on withdrawal : At maturity, the entire corpus is tax-exempt
Tier II - National Pension Scheme
Eligibility : Members of Tier I only
Lock-in : No
Minimum number of contributions in year : Nil. You can choose not to make any contribution in a year
Minimum contribution for account opening : Rs 1,000
Minimum amount for subsequent contribution : Rs 250
Minimum number of annual contributions : Not mandatory
Tax benefits on contribution : No tax benefit
Taxation on withdrawal : The entire corpus can be withdrawn, which is added to income and taxed as per the tax slab one falls in
Tier I and Tier II National Provident Fund are same for the bellow
Equity (E): Scheme invests predominantly in Equity market instruments.
Corporate Debt (C): Scheme invests in Bonds issued by Public Sector Undertakings , Public Financial Institutions , Infrastructure Companies and Money Market Instruments
Government Securities (G): Scheme invests in Securities issued by Central Government/State Governments/Money Market Instruments
Alternative Investment Funds (A): In this asset class, investments are being made in instruments like REITS, AIFs, etc.
