National Pension Scheme (NPS)

National Pension System (NPS) is an investment and pension plan launched by the Indian Government. This scheme is regulated and administered by the Pension Fund Regulatory and Development Authority (PFRDA). Any citizen of India, whether resident or non-resident can join NPS, subject to the following conditions: (i) age between 18-70 years (ii) know your customer (KYC) documentation. The contribution made by NRI is subject to regulatory requirements as prescribed by RBI and FEMA from time to time.

Tier I and Tier II accounts: 

Tier I is the basic tier in NPS and is a mandatory account. The investment amount is locked till 60 years of age. At the age of 60, 60% of the accumulated amount can be withdrawn, and the remaining amount will be paid out as a monthly pension. Tier I is eligible for tax deduction up to an investment of Rs. 50,000 under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakhs available under section 80C of the Income Tax Act. 

Tier II is more flexible tier of NPS, it’s a voluntary savings facility available as an add-on to any Tier I account holder. Subscribers will be free to withdraw their savings from this account whenever they wish and carries no tax benefit. An investor needs to have a Tier I investment before they can invest in Tier II.