National Pension Scheme (NPS) Tier 1 is a retirement account. Being the primary NPS account, the individual can only open a Tier 2 account after opening the Tier 1 account. This account is opened under the NPS (Central Govt), NPS (State Govt), NPS (Corporate), and NPS (All Citizens Models). Although various rules apply to each of NPS accounts, the general rules are stated below, and they are applied to all types of NPS Tier 1 accounts.
To keep the account active, the individual has to deposit at least Rs 1,000 per annum. The NPS Tier 1 account matures at the age of 60 and it can be extended till the age of 70.
NPS Tier 1 is eligible for a tax deduction on contributions up to Rs 1.5 lakh under Section 80 C and an additional Rs 50,000 under Section 80 CCD (1B) of the Income Tax Act, 1961. Upon withdrawal, 40% of the NPS Tier 1 account balance can be withdrawn tax-free. Another 40% is compulsory to be used for buying an annuity, monthly pension. The remaining 20% is either used to purchase an annuity or be withdrawn after paying tax at the individual's slab rate.
To know the eligibility for NPS Tier 1 click here & to its premature closure withdrawal rules click here.
If the individual has an Aadhaar Card, PAN Card, and bank account, it can open an NPS account online at enps.nsdl.com or enps.karvy.com and follow the steps described here. To open NPS account offline click here.
The minimum contribution to make for NPS Tier 1 is Rs 1,000 per annum, and there is no maximum limit on NPS Tier 1 contribution. The minimum initial contribution is Rs 500.
To contribute online to NPS Tier 1 visit enps.nsdl.com
NPS Tier 1 account provides tax deduction under Section 80CCD(1) and 80CCD(2) on contributions up to Rs 1.5 lakh per annum.