NPS Deduction for Tier 1 or Tier 2 Accounts?

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  1. Gauravgg2

    Gauravgg2 New Member

    As specified in last year budget that additional deduction will be allowed for rs 50000 invested into a NPS scheme. But nowhere it was mentioned what should be the type of NPS account for such a deduction, Tier-1 or Tier-2???Need a clarification regarding same since office administration is saying that this deduction is valid only for tier - 2 accounts
     
  2. Yatin Gandhi

    Yatin Gandhi Active Member

    Deduction for NPS Account is allowed only for Tier 1 Accounts and not for Tier 2 Accounts.
     
  3. Gauravgg2

    Gauravgg2 New Member

    hey Yatin can you pls provide a written proof for the same will be needed to be produced to the officers. The same will be. very much appreciated
     
  4. V K Khanna

    V K Khanna Active Member

    I agree with @ Yatin Gandhi.

    @ Gauravgg2. Let me clarify the salient features of Tier l and Tier 2 accounts of NPS and hopefully it will make you understand which account is tax free under the NPS.

    Tier l: This is a non-refundable retirement account which can be withdrawn only upon meeting the exit conditions prescribed under NPS.

    Tier 2: This is a voluntary saving facility available as an add-on to any Tier l account holder. Subscribers will be free to withdraw their savings from this account whenever they wish.

    Thus you will find that Tier 2 account is like your saving bank account where you are free to withdraw the amount as you wish any number of times without any tax benefit on deposits.

    The position is different in Tier 1 account where withdrawal is permissible on maturity or death and hence you get EET benefit under the Tier 1 account.

    In case you need further clarification, you can have from the website of PFRDA.
     
    Piyush Chawla likes this.
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