What is an NPS Investment Plan?

The National Pension System (NPS) Investment Plan is a government-backed retirement savings initiative. Indian citizens, including NRIs, can invest in NPS to build a substantial corpus for retirement. It allows individuals to invest in a pension account during their working years. Additionally, it offers flexibility to choose different investment options managed by professional fund managers and provides market-linked returns on the investments. The NPS also comes with tax benefits, making it an attractive retirement-planning tool for individuals. NPS investment aims to provide financial stability during post-retirement years.

Two Types of NPS Investment

• Tier I NPS +

  Tier I NPS is the primary pension account with certain withdrawal restrictions. It is designed to provide a retirement corpus and mandates a minimum contribution and a lock-in period until the age of 60. The funds invested in Tier I NPS are eligible for tax deductions under Section 80C of the Income Tax Act.

  • ✓Lock-in period until the age of 60.
  • ✓Eligible for tax deductions under Section 80C.
• Tier II NPS +

  Tier II NPS, on the other hand, is an optional investment account that offers flexibility in terms of withdrawals. It allows individuals to invest and withdraw funds as per their requirements without any lock-in period. However, contributions made to Tier II NPS do not qualify for additional tax benefits. It functions more like a voluntary savings account, providing liquidity alongside the primary Tier I NPS account.

  • ✓No levy of exit load.
  • ✓No minimum balance required.

Whether you choose Tier I for long-term retirement savings or Tier II for more flexible saving, NPS offers a valuable opportunity to secure your financial future.