National Pension System: What are the features of NPS Tier-I, Tier-II accounts?

Nov 21, 2022

Synopsis
All Indian nationals between the ages of 18 and 60 are eligible to invest in NPS. Under NPS accounts, there are two different kinds of accounts: Tier I and Tier II.

Retirement planning and tax savings are two advantages of the government-sponsored NPS program. It is managed by the Pension Fund Regulatory and Development Authority (PFRDA). The main goal of the NPS is to assist investors in creating sizable retirement savings. NPS investments are open to all Indian citizens between the ages of 18 and 60. There are two types of accounts under NPS accounts: Tier I and Tier II.

Individual Pension Accounts, or Tier-I, are the default pension accounts covered by all Income Tax Act tax advantages.
A subscriber with an active Tier-I account may choose to open a Tier-II investment account. There are no withdrawal limitations and tax advantages with this account. It is not a pension account, Tier-II.

Documents needed to open NPS account
The applicant has to submit duly filled Subscriber Registration Form along with the following documents to the Service Provider (PoP)/Online:
For resident Individuals:

1. One Recent Photograph
2. PAN Card
3. Proof of Address
4. Proof for the Bank Account

Non-resident Individual (NRI):

1. One Recent Photograph
2. PAN C
3. ard
4. Indian Passport
5. Proof of address – India
6. Proof for the Bank Account (NRE/NRO)

Overseas Citizen of India (OCI):

1. One Recent Photograph
2. PAN Card
3. OCI Card
4. Proof of address - foreign country
5. Proof for the Bank Account (NRE/NRO)

The Annuity Service Provider (ASP) will provide the subscriber with a pension in accordance with the terms and conditions of the Annuity Plan they selected and bought from the ASP (Insurance Company).

Permanent Retirement Account Number (PRAN)
PRAN is a unique identification number given to a subscriber for his or her NPS-opened individual pension account. The PRAN is unaffected even if the subscriber changes jobs, industries, or location.

Minimum contributions for TierI and Tier II account
At the time of registration, a Subscriber must make an initial contribution (minimum of Rs. 500 for Tier I and a minimum of Rs. 1000 for Tier II).

Following that, a Subscriber may make a contribution under the following conditions:
Tier I:
Minimum amount per contribution - Rs. 500
Minimum contribution per Financial Year - Rs. 1,000
Minimum number of contributions in a Financial Year – one

A Subscriber may decide on the frequency of contributions throughout the year, in addition to the mandated limit of a minimum of one contribution in Tier I.

Tier II:
Minimum amount per contribution - Rs. 250
No minimum balance required
If minimum contribution is missed

If the required minimum contribution is not made, the account is considered "frozen" and will become active once the required minimum payment is made. Only when a subscriber submits a request (physically or online) to a service provider for exit from NPS will the NPS account be closed (PoP).

NPS Account Tier I: This is the non-withdrawable permanent retirement account into which the subscriber's regular contributions are credited and invested in accordance with the portfolio/fund manager of the subscriber's choice.

NPS Tier-II account: This voluntary withdrawable account is only permitted if the subscriber has a current Tier I account in their name. Withdrawals from this account are allowed in accordance with the subscriber's demands as and when necessary.

[The Economic Times]