How to Invest 100% Equity in NPS (Tier II)

A common question: "Can I put my entire NPS in equity?" The answer depends entirely on which NPS account you mean — Tier I caps you well below 100%, but Tier II doesn't.

Why Tier I Cannot Go to 100% Equity

Under Active Choice in Tier I, equity (Asset Class E) is capped at 75% for subscribers below 50 years old, and this cap steps down further as you age (a mandated de-risking glide path designed to protect a retirement corpus from late-life volatility). This is a regulatory design choice, not a platform limitation — no Pension Fund Manager can override it for Tier I.

Tier II: Where 100% Equity Is Actually Allowed

Tier II — the voluntary, no-lock-in NPS account — allows Active Choice allocation up to 100% in Equity (Class E). There's no glide-path restriction here because Tier II isn't treated as a locked retirement corpus; it's a flexible investment account that happens to share NPS's low-cost fund management infrastructure.

This makes Tier II with 100% equity functionally similar to investing in an index-tracking equity fund, but through the NPS fund management structure — with two important differences from a mutual fund:

• No lock-in — you can withdraw anytime, same as a mutual fund.
• No tax benefit on Tier II contributions — unlike Tier I's Section 80CCD deductions.
• Very low fund management charges — NPS PFM charges are among the lowest of any regulated investment vehicle in India.

Who Should Consider This

• Someone who has already maxed out Tier I contributions and 80C/80CCD deductions and wants a low-cost, equity-heavy vehicle for additional long-term savings.
• Someone comfortable with equity volatility and a long time horizon (this is not a place to park an emergency fund or short-term goal money).

Who Should Not

• Anyone looking for a tax deduction — Tier II offers none on the way in (a few specific government-employee schemes have narrow exceptions; check your own eligibility before assuming a benefit applies).
• Anyone needing the money within a few years — 100% equity means full exposure to market drawdowns with no downside cushion.
• Anyone who hasn't first built an emergency fund and adequate insurance cover — equity-heavy accounts should come after the basics, not instead of them.

How to Set It Up

See our step-by-step guide to opening an NPS account if you don't have Tier I yet — Tier II activation follows the same portal.

1. You must already have an active Tier I account (Tier II cannot be opened standalone).
2. Log in to your CRA (Central Recordkeeping Agency) portal or eNPS.
3. Choose "Tier II Activation," select your Pension Fund Manager, and choose Active Choice.
4. Set Equity (E) allocation to 100% (or your preferred split across E/C/G if you don't want full equity).
5. Contribute — Tier II has no minimum ongoing contribution requirement, though a small minimum applies at account activation.

Taxation on Withdrawal

Tier II withdrawals are treated as capital gains based on the underlying asset mix and holding period — since equity-heavy Tier II behaves similarly to an equity-oriented investment for tax purposes, check current capital gains rules for the assessment year before withdrawing, as the classification and rates have been revised in recent Budgets.

Key Principle

"100% equity in NPS" is real, but only via Tier II — treat Tier I and Tier II as two genuinely different accounts with different purposes (locked retirement corpus vs flexible high-growth savings), not two settings on the same account.