Under the NPS, a person who wants to take advantage of is given a special permanent retirement account number (PRAN). This account number remains up to the customer’s life. This specific PRAN can be used at any place in India.
There are two accounts under it.
Tier 1 Account
This account is a non-withdrawal account for retirement which is especially for saving.
Tier 2 Account
This is a voluntary savings feature. That is, the customer can withdraw money from this account whenever you want. No tax benefits are available on this account.
At least 500 rupees in Tier-I account and at least Rs. 1000 in Tier-II accounts are to be deposited while opening the account. There is no limit on the maximum amount. In the same way, a Tier-1 account will have to deposit at least Rs 6000 in the entire year and Rs 2,000 in Tier 2 accounts.
Required documents for opening an account
- Address proof
- Identity proof
- Birth/10th class certificate
- Subscriber Registration Form
4 Key points of tax exemption under NPS
These are the four important tax exemption under NPS which you should know:
- Provision of tax exemption occurs under NPS section 80C. Though these discounts in tax rebates will be similar to PPF and ELSS.
- If employer deposits money in your NPS account, the tax will rebate on that too. It will not be added to your taxable income. Provision of similar exemption in EPF scheme occurs.
- After 60-65 years of age, 60% of the amount can be withdrawn from the NPS Tier-I account. However, this amount will not be taxed. It will be necessary to put the remaining money in the Annuity Plan. The Scheme gives you lifetime pension.
- Here is the opportunity to save more tax in NPS than PPF, EPF, ELSS By investing money in this scheme. You can get a tax rebate on additional investment of 50 thousand rupees. Under Section 80C, there is a tax exemption on investment of 1.5 lakhs. An additional tax rebate of 50 thousand rupees will be given for investing in NPS.
Under NPS, a person is not allowed to open multiple NPS accounts. However, a person can open an account in NPS and another in the account of the Atal Pension Scheme.
One can withdraw money from the NPS account for the treatment of serious illnesses, for children’s higher education, marriage or buying or making a house.