Tier I is the individual pension account under the National Pension System. It is the account that opens by default. The money stays invested until an exit, a partial withdrawal, or death. This is the account the tax sections attach to. If a deduction is going to be allowed, it is allowed here.
A normal non-government exit at 60, or after 15 years of subscription, needs at least 20% of the corpus in an annuity if the corpus is above ₹8,00,000. Up to 80% can be a lump sum. Schedule II exempts a lump sum only up to 60% of the corpus. That was section 10(12A). A premature exit is stricter, and this calculator does not price that path.
Your own contribution can be claimed under section 123 (this was section 80CCD(1)) and an extra ₹50,000 under section 124(3) (this was section 80CCD(1B)), only outside the new regime. An employer’s contribution is section 124 (this was section 80CCD(2)) and survives in the new regime, within the percentage of salary. Section 202 is explicit about which of these it keeps.
Partial withdrawal is allowed after 3 years, up to 25% of your own contributions, excluding returns, for the purposes in the exit regulations. Before 60 you can do this a limited number of times, with a gap of years between them. It is not a substitute for a savings account.
A worked example
The NPS engine projects a Tier I corpus. ₹5,000 a month from age 30, at 10%, grows to ₹1,13,96,627. That return is a planning rate. PFRDA does not notify one.
At exit, 40% buys an annuity of ₹45,58,651, and the lump sum is ₹68,37,976. The tax-free lump sum is ₹68,37,976. The pension estimate is ₹22,793 a month at 6%. Read those as Tier I numbers. They are not a Tier II balance. The NPS calculator labels the corpus. The NPS guide sets out the tiers and the tax so the deduction is claimed on the right account.
Mistakes people make
- Claiming a deduction on a normal Tier II deposit.
- Withdrawing as if Tier I were a mutual fund with no exit rule.
- Assuming the whole 80% lump sum is tax-free. The Schedule II line is 60%.
- Using the calculator’s 10% as a guaranteed Tier I return.
- Forgetting the three-year wait before a partial withdrawal.
The section
Tier I deductions: section 123 and section 124 (these were section 80CCD(1), 80CCD(1B) and 80CCD(2)). The exit exclusion is Schedule II (this was section 10(12A)). The withdrawal limits are in the PFRDA exit regulations, not in the tax Act.
Questions
Can I withdraw Tier I whenever I want?
Not like a savings account. A partial withdrawal is allowed after 3 years, up to 25% of your own contributions, for the purposes in the exit regulations. The rest waits for an exit.
Which deductions attach to Tier I?
Your own contribution under section 123 and the extra ₹50,000 under section 124(3), both only outside the new regime, and the employer’s contribution under section 124, which can remain in the new regime. A normal Tier II account has none of these.
What happens at 60?
On the calculator’s path, ₹5,000 a month from age 30 becomes a corpus of ₹1,13,96,627. At least 20% buys an annuity if you are above ₹8,00,000. The example puts 40% into the annuity.
Sources
Figures checked 28 Oct 2026.