NPS or National Pension System is a retirement scheme where a contributor invests certain sum of money throughout the service period and get a part of it as lump sum amount on retirement and another part is used for purchasing annuity for life.. It is primarily divided into two accounts – NPS Tier I account and NPS Tier II account.
NPS Tier I is the primary NPS account and you can open a Tier II account only after opening a Tier I account. The account can be opened under the NPS (Central Government), NPS (State Government), NPS (Corporate) and NPS (All Citizens Models). Different rules apply to each, but the general rules stated below apply to all types of NPS Tier I accounts.
You need to deposit at least Rs. 1,000 per annum to keep the account active. The NPS Tier I account matures at the age of 60 and you can extend it till the age of 75.
NPS Tier I account is also used as a tax-benefitting scheme as it is eligible for 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. On maturity, up to 60% of the NPS Tier I account balance can be withdrawn tax-free. The remaining 40% must be compulsorily used to buy an annuity (monthly pension).
Features of NPS Tier I Account
Given below are a few key features of NPS Tier I account that differentiate it from NPS Tier II account:
- Minimum and Maximum Contribution: You can open an NPS Tier I account with an initial contribution of Rs. 500. You are only required to make a minimum annual contribution of Rs. 1,000 to keep your account active and while there is no limit on the maximum amount that you can contribute in a year.
- Eligibility: Indian residents aged between 18 – 70 years and NRIs aged between 18 – 60 years, salaried as well as self-employed individuals can open an NPS Tier I account.
- Lock-in period: NPS Tier I account has a lock-in till you reach the age of 60 years. However, you can make partial withdrawals up to 25% of the accumulated corpus after 3 years of opening the account
- Returns: The returns on NPS are market-linked and largely depend on the performance of the assets you have chosen.
- Taxation: Contributions up to Rs. 2 Lakh to your NPS Tier I account in a financial year are eligible for tax deduction, that is, 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. Moreover, on maturity, up to 60% of the accumulated corpus in your NPS Tier I account can be withdrawn tax-free. The balance of 40% needs to be mandatorily used to purchase annuity (monthly pension).
- Documents: NPS Tier I account can be opened with minimal documentation including PAN card (mandatory), cancelled cheque, proof of identity, proof of address and proof of date of birth.
- Can be Opened Online or Offline: NPS Tier I account can be opened both online and offline. You can also open your NPS Tier I account via the Paisabazaar website.
- Withdrawal: NPS Tier I allows you to withdraw up to 60% of the accumulated amount partially at the time of retirement
- Closure: With NPS Tier I, subscribers also have the option to make a premature exit from their NPS account after they have invested in the scheme for 5 years.
Eligibility Criteria to Open NPS Tier I Account
Here are a few key criteria that you must meet in order to be eligible to open an NPS Tier I account:
- You should be an Indian citizen aged between 18 – 70 years or an NRI aged between 18 – 60 years
- You should have a valid mobile number, email address and an active bank account with the internet banking facility
- Your mobile number should be registered with UIDAI (Aadhaar)
NPS Tier I Contribution
The minimum NPS Tier I contribution is Rs. 1,000 per annum. There is no maximum limit on your NPS Tier I contribution. The minimum initial contribution to the NPS Tier I Account is Rs. 500.
You can contribute online to NPS Tier I at enps.nsdl.com or through Paisabazaar.
NPS Tier I Lock-in Period
The NPS Tier I account has a lock-in till the age of 60. However, you can exit the system prematurely before 60 once you have completed 5 years. In case you choose this option, you will be able to withdraw only 20% of your accumulated corpus which will be exempt from tax. The balance 80% has to be used to buy annuity (regular pension). The annuity will be fully taxable as per the tax slab you fall into.
However, if the total NPS corpus is less than Rs. 2.5 Lakh then the complete corpus (100%) can be withdrawn as lump sum and this withdrawal will be exempt from tax.
Returns on NPS Tier I
NPS Tier I returns are derived by investing in equities, corporate bonds, government bonds and alternative assets – the four NPS asset classes. You can decide the split between these assets as per your convenience subject to a limit of 75% on equity investment and 5% on alternative assets*. You can also select 1 of 11 NPS Pension Fund Managers. NPS returns are market-linked and thus, akin to mutual fund returns rather than the fixed returns offered by savings schemes like PPF. You can view the historic returns of NPS Pension Funds below:
*Different limits apply to government employees
Returns of NPS Tier I (Equity) as of February 9, 2024
| Pension Fund | 1 Year Return | 3 Year Return | 5 Year Return | Returns since Inception |
| Aditya Birla Sun Life Pension Management Ltd. | 29.34% | 16.16% | 16.30% | 14.20% |
| Axis PF | 26.83% | NA | NA | 18.37% |
| HDFC PF | 27.63% | 16.40% | 16.84% | 15.43% |
| ICICI PF | 32.96% | 17.84% | 17.09% | 13.16% |
| Kotak PF | 29.86% | 17.67% | 17.18% | 12.52% |
| LIC PF | 27.98% | 17.50% | 16.26% | 13.67% |
| Max Life Pension Fund Management Limited | 30.38% | NA | NA | 16.39% |
| SBI PF | 28.41% | 15.90% | 15.58% | 11.53% |
| Tata Pension Management Pvt. Ltd. | 32.97% | NA | NA | 21.68% |
| UTI Retirement Solutions Ltd.
|
29.26% | 16.76% | 16.09% | 12.89% |
| Average | 29.56% | 16.89% | 16.48% | 14.98% |
Returns of NPS Tier I (Corporate Bonds) as of February 9, 2024
| Pension Fund | 1 Year Return | 3 Year Return | 5 Year Return | Returns Since Inception |
| Aditya Birla Sun Life Pension Management Ltd. | 7.92% | 6.02% | 8.41% | 8.30% |
| Axis PF | 7.95% | NA | NA | 7.43% |
| HDFC PF | 7.91% | 6.21% | 8.62% | 9.27% |
| ICICI PF | 7.91% | 6.02% | 8.18% | 9.57% |
| Kotak PF | 7.85% | 5.86% | 7.60% | 9.26% |
| LIC PF | 7.70% | 5.81% | 8.31% | 9.03% |
| Max Life Pension Fund Management Limited | 7.53% | NA | NA | 6.84% |
| SBI PF | 7.77% | 5.86% | 8.22% | 9.59% |
| Tata Pension Management Pvt. Ltd. | 7.56% | NA | NA | 6.39% |
| UTI Retirement Solutions Ltd.
|
8.01% | 5.70% | 7.90% | 8.70% |
| Average | 7.81% | 5.93% | 8.18% | 8.44% |
Returns of NPS Tier I (Government Bonds) as of February 9, 2024
| Pension Fund | 1 Year Return | 3 Year Return | 5 Year Return | Returns Since Inception |
| Aditya Birla Sun Life Pension Management Ltd. | 9.77% | 6.09% | 8.55% | 7.97% |
| Axis PF | 9.23% | NA | NA | 9.22% |
| HDFC PF | 9.50% | 5.81% | 8.51% | 9.10% |
| ICICI PF | 9.40% | 5.74% | 8.29% | 8.52% |
| Kotak PF | 9.81% | 5.97% | 8.46% | 8.53% |
| LIC PF | 9.39% | 5.88% | 8.73% | 9.86% |
| Max Life Pension Fund Management Limited | 9.43% | NA | NA | 9.26% |
| SBI PF | 9.71% | 5.78% | 8.35% | 9.10% |
| Tata Pension Management Pvt. Ltd. | 9.39% | NA | NA | 8.65% |
| UTI Retirement Solutions Ltd.
|
9.66% | 5.72% | 8.30% | 8.29% |
| Average | 9.53% | 5.86% | 8.46% | 8.85% |
Returns of NPS Tier I (Alternative Assets) as of February 9, 2024
| Pension Fund | 1 Year Return | 3 Year Return | 5 Year Return | Returns Since Inception |
| Aditya Birla Sun Life Pension Management Ltd. | 9.43% | 6.96% | 6.22% | 6.44% |
| Axis PF | 6.92% | NA | NA | 6.55% |
| HDFC PF | 10.36% | 8.58% | 9.25% | 8.57% |
| ICICI PF | 8.55% | 6.28% | 7.21% | 6.85% |
| Kotak PF | 10.69% | 5.72% | 7.78% | 6.86% |
| LIC PF | 8.39% | 6.77% | 7.93% | 7.59% |
| Max Life Pension Fund Management Limited | 6.91% | NA | NA | -4.26% |
| SBI PF | 11.19% | 7.28% | 9.59% | 8.76% |
| Tata Pension Management Pvt. Ltd. | 9.10% | NA | NA | 8.03% |
| UTI Retirement Solutions Ltd.
|
5.70% | 5.96% | 5.69% | 6.09% |
| Average | 8.72% | 6.79% | 7.67% | 6.15% |
NPS Tier I Tax Benefits
You get a tax deduction under Section 80 CCD(1) and 80CCD (2) on contributions to the NPS up to Rs. 1.5 Lakh per annum.
- For employees, the maximum contribution eligible for tax deduction under these sections is limited to 20% of salary.
- For self-employed, the maximum contribution eligible for tax deduction under these sections is limited to 20% of income.
- In addition, you can get a tax deduction on contributions up to Rs. 50,000 under Section 80CCD (1B). Hence, the total tax benefit on contributions to NPS Tier I accounts is Rs. 2 Lakh per annum.
- In addition, the returns on NPS are tax-exempt while the money is retained in the NPS account.
- On maturity, up to 60% of the accumulated NPS corpus can be withdrawn free of tax. The remaining 40% must be used to buy an annuity (regular pension).
Documents Required to Open NPS Tier I Account
The following documents are required to be submitted in order to open an NPS Tier I account:
- Duly-filled NPS account opening form/registration form
- PAN (mandatory)
- Cancelled cheque
- Proof of identity such as Aadhaar card, PAN card, driving license, etc.
- Proof of address such as Aadhaar card, driving license, passport, etc.
- Proof of age or proof of date of birth such as Aadhaar card, birth certificate, etc.
- Photograph(s)
In addition, NRIs also need to provide the following details and documents:
- NRE/NRO bank account details and passport
- Choose their bank account status, i.e., Non-Repatriable account or Repatriable account
- Choose their preferred address for communication, i.e., overseas address or permanent address (communication at overseas address would entail additional charges)
How to Open NPS Tier I Account
If you have an Aadhaar card, PAN card and bank account, you can open an NPS account online at enps.nsdl.com or nps.kfintech.com. These are the portals of the Central Recordkeeping Agencies (CRAs) in the NPS ecosystem. Moreover, you can also open an NPS account online through the Paisabazaar website.
If you prefer to do this offline (in person), you can go to your nearest NPS Point-of-Presence (PoP) which is typically a designated branch of your bank. You can get a full list of NPS PoPs
In either case (online or offline account opening), you can make contributions, change key details, change fund managers and initiate withdrawals online at enps.nsdl.com or nps.kfintech.com.
NPS Tier I Account Withdrawals
You can make partial and complete withdrawals from your NPS Tier I account both online and offline, subject to the following terms and conditions:
Before Retirement
You can make partial withdrawals up to 25% of the accumulated amount from your NPS Tier I account after 3 years of continuous contribution. Three partial withdrawals can be made during the entire investment period and are tax-free. However, these are permitted only under certain circumstances such as to fund a child’s marriage or higher education, buying a house or medical emergencies.
After Retirement
Once you retire you need to mandatorily use 40% of the total accumulated NPS corpus to purchase annuity. Out of the other 60%, 40% can be withdrawn tax-free, whereas, the remaining 20% can be either used to purchase annuity or can be withdrawn.
How to Withdraw Money from NPS Tier I
You can log in to your NPS Tier I account from enps.nsdl.com.
You need to provide your PRAN number and date of birth in order to login.
You can make withdrawals online after logging into your account.
Alternatively, you can go to the nearest branch of your NPS point-of-presence (PoP), usually your bank, and submit a withdrawal request there.
Closure of NPS Tier I Account
You can choose to prematurely close your NPS Tier I account once you have completed 5 years. However, if you choose to exit prematurely, you can withdraw only 20% of your accumulated corpus which will be exempt from tax.
The remaining 80% must be used to buy annuity (regular pension). Moreover, the annuity will be fully taxable as per the tax slab.
However, in case the total corpus is less than Rs. 2.5 Lakh then the complete accumulated amount can be withdrawn as a lump sum and will be exempt from tax.
How to Close an NPS Tier I Account
You can submit a request to close your NPS Tier I account by logging into your account online at enps.nsdl.com.
Alternatively, you can go to the nearest branch of your NPS point-of-presence (PoP) and submit a closure request there.
NPS Tier I Grievance Redressal
NPS Tier I subscribers can raise their grievances via the following channels:
- Email: You can send an email to grc@pfrda.org.in
- Toll-free number: You can make a call on the Protean toll-free helpline number 1800 2100 080
- By post: You can write and send your grievance at the following address:
Grievance Redressal Cell,
PFRDA, B-14/A, ChatrapatiShivajiBhawan,
Qutab Institutional Area, Katwaria Sarai, New Delhi-110016
In case, your grievance is not resolved, you can escalate the same using the following escalation matrix:
- Escalation Matrix for Central Grievance Management System (CGMS) – Only for NPS-related queries/complaints
Level I
Name: Ms. Smita Yogesh Nair (Grievance Redressal Officer (GRO))
Phone Number: 022 40904242 (Ext. 7350)
Email ID: gro@proteantech.in
Level II
Name: Mr. Mandar Karlekar (Chief Grievance Redressal Officer (CGRO))
Fax Number: 022 24915217
Email ID: cgro@proteantech.in
- Escalation Matrix for exits related to NPS
Level I
Name: Mr. Haidar Ali Shaikh
Email ID: npsclaimassist@proteantech.in
Escalation Level
Level II
Name: Mr. Dinesh Dalvi
Email ID: Dinesh.Dalvi@proteantech.in
Level III
Name: Mr. Mandar Karlekar
Fax Number: 022 24915217
Email ID: MandarK@Proteantech.in
Also, in case you have opened your NPS account through Paisabazaar, the contact details of NPS grievance redressal officer are as follows:
Name– Ms. Jyotsna Popli
Email– npsgrievanceofficer@paisabazaar.com
Phone– 1800-258-5615
Calling Time: 9:30 AM-6:30 PM
To know more about NPS Grievance Redressal Mechanism, click here
FAQs on NPS Tier I
Q. Can I open an NPS Tier I account without opening a Tier II account?
Yes, you can open an NPS Tier I account without a Tier II account. However, you need to open an NPS Tier I account in order to invest into an NPS Tier II account.
Q. I am an NRI. What should be my minimum annual contribution?
NRIs are required to make a minimum annual contribution of Rs. 6,000.
Q. What is the NPS Tier I interest rate?
NPS Tier I does not have a fixed interest rate since it’s a market-linked savings scheme. However, the effective rate of interest can be apparently higher than the rate of interest offered by many other saving schemes.
Q. What if I contribute more than Rs. 2 Lakh to my NPS Tier I account?
There is no limit on the amount or the number of contributions that you make to your NPS Tier I account. However, you will be able to avail tax benefits only up to Rs. 2 Lakh in a financial year even if you contribute more than Rs. 2 Lakh.
Q. Can I invest in NPS Tier I if I have invested in any other provident fund?
Yes, you can invest in NPS Tier I irrespective of your investment in any other provident fund.