Question
What is the difference between NPS Tier 1 and Tier 2?
Answer
Bottom line: Tier 1 is the locked retirement account with tax benefits; Tier 2 is a flexible add-on with no extra tax break.
1. Tier 1
Withdrawals are restricted until retirement, but it carries the deductions, including the extra ₹50,000 under 80CCD(1B).
2. Tier 2
Voluntary and freely withdrawable, but private investors get no additional tax benefit and gains are taxed at slab.
3. Regime note
The 80CCD(1B) benefit applies only under the old regime.
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This answer is general information based on the law as it stood when written and is not professional advice on your specific situation. Verify the current position and consult a qualified professional before acting. See our disclaimer.