8 Differences Between NPS Tier I & Tier II Accounts

Outlook Money

Savings & Investment Plans

NPS Tier 1 account is a retirement savings plan, whereas the Tier 2 account is a regular investment plan.

Investing Vs Saving

Eligibility

Indians aged 18-70 can open Tier 1 accounts, while Tier 2 applicants must be enrolled in Tier 1 to be eligible.

Eligibility Criterion

Lock-In-Period

The lock-in period in a Tier 1 account is until the retirement age of 60; a Tier 2 account has no lock-in.

Varied Lock-In Periods

Maturity

Tier 1 account holders can withdraw up to 60% of the corpus tax-free at maturity, the rest is used for annuity plans; Tier 2 accounts have no maturity period.

Conditions to be fulfilled at Maturity

Active & Auto

Tier 1 accounts offer both active and auto investing options, while Tier 2 account holders can only access the active option.

Active vs Auto

Partial Withdrawals

Tier 1 account holders can withdraw 25% of their invested corpus thrice until maturity after three years; Tier 2 accounts do not have such restrictions.

Withdrawals allowed

Tax Benefit

Tier 1 account holders get tax benefits, while Tier 2 accounts don't have such relief, as withdrawals are added to the individual's taxable income and taxed accordingly.

Tax Benefits and deductions

Annuity

Tier 1 account holders require to buy an annuity plan after maturity, Tier 2 account holders don't have such obligations.

Compiled By Himani Verma

Annuities

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