Tier 2 National Pension Scheme (NPS) Account is one of the 2 tiers of pension account offered by the Government of India. It offers flexibility in terms of the NPS withdrawal rules and allows the subscribers to withdraw money without paying penalty fee.
Ways to Open an NPS Tier-II Account
Given below is the method to open an NPS Tier-II account online:
- You will need to visit the eNPS website (https://enps.nsdl.com/eNPS/NationalPensionSystem.html).
- Next, click on ‘National Pension System’.
- Once you click on ‘National Pension System’, a pop-up will appear. Click on ‘Tier-II Activation’.
- On the next page, you will need to enter your Permanent Retirement Account Number (PRAN), date of birth, Permanent Account Number (PAN), and the captcha.
- Next, click on ‘Verify PRAN’.
- Once the PRAN details are verified with your Tier-I account, the Tier-II account will get activated.
Individuals can open a Tier-II account only if they have a Tier-I account. Given below is the procedure to open a Tier-II account offline:
- Subscribers will need to use the ‘Subscriber’s POP-SP’ to open a Tier-II account.
- Next, the subscriber will need to download the Annexure 1: Tier-II Details form (https://npscra.nsdl.co.in/download/government-sector/central-government/forms/C-023-15-NeGIL-CRA-NPS%20Form%20Annexure%201.pdf) and send the filled form to the POP-SP.
- Bank details will also be submitted in order to open a Tier-II account. In case of withdrawals, the amount will be sent directly to the bank account.
Features of NPS Tier 2 Account
Given below are the main features of the NPS Tier-II account:
- It is not mandatory to have a Tier-II account in order to invest in NPS.
- All members of the Tier-I account can open a Tier-II account.
- It is mandatory to have a bank account to open a Tier-II account.
- The minimum contribution at the time of opening a Tier-II account is Rs.1,000.
- At least one contribution must be made in a year.
- The minimum amount of contribution that must be made is Rs.250.
- The minimum balance that must be present in the account is Rs.2,000.
- Transfer of funds from a Tier-II to a Tier-I account can be easily done.
- No NPS tax benefits can be availed under a Tier-II account.
- Activation and transaction charges are to be paid by the subscriber.
Eligibility for NPS Tier 2 Account
In order to obtain an NPS Tier 2 Account, following is the eligibility criteria that needs to be fulfilled.
- Any citizen of India, resident or non-resident can join the National Pension System and can obtain the NPS Tier 2 Account
- An active Tier 1 NPS Account is a prerequisite of obtaining a Tier 2 Account
- Individual needs to be 28-60 years of age on the date of submission of NPS form
- Non Resident Indians are also eligible to register for the NPS scheme
Taxation Process of Funds in NPS Tier 2 Account
Unlike the Tier 1 NPS Account, Tier 2 NPS Account does not qualify for tax rebate under section 80C of the Income Tax Act. This is because NPS Tier 2 Account does not have a locking period for funds which Tier 1 Account has. However, withdrawals are taxed according to the time at which withdrawal is made. So withdrawals within a year of investment attract short-term capital tax while those after a year of depositing earn long-term capital tax. For debt funds it is 10% while for equity funds the tax applicable is nil.
Withdrawal Process of Tier-II NPS Account
In order to redeem funds from your NPS Tier 2 Account, following is the process that needs to be followed:
- Duly filled UOS-S12 form for withdrawal
- Redemption amount may vary depending upon the applicable NAV at the time of redemption
- Funds get transferred from trustee’s bank account to subscriber’s account in a matter of maximum 3 working days
- You can use NPS Calculator to know how much pension amount will you get.
Documents Required to Open Tier-II NPS Account
The only criteria required for obtaining NPS Tier 2 Account is an existing Tier 1 Account. Hence, the KYC documents are already submitted. These are -
- Duly filled registration form
- Identity Proof of applicant
- Address Proof of applicant
- Age or Date of Birth proof of the applicant
PRAN Card is the only valid document required for opening an NPS Tier 2 Account.
FAQ’s on NPS Tier-II
- How can a Tier-II account be defined?
- What are the benefits of a Tier-II account?
Tier-I and Tier-II are the two types of retirement accounts that can be opened under the National Pension System (NPS). While the Tier-I account is a mandatory account that must be opened, a Tier-II account is a voluntary account that can be opened by an individual. Individuals who open a Tier-II account have more flexibility when it comes to the withdrawal of the amount as it can be withdrawn at any given time, unlike in a Tier-I account.
Given below are the main benefits of a Tier-II account:
- A separate nominee can be added to the Tier-II account.
- A minimum balance is not required.
- Since withdrawal is possible anytime, individuals can save daily.
- There are no annual maintenance charges.
- Transfer of funds to the Tier-I account is possible any time.
- There are no charges for exiting the scheme.
- Investment pattern from the Tier-I account can be chosen.
A Tier-II account can be opened by individuals who have opened a Tier-I account.
- Indian residents can open a Tier-I account. Non-Resident Indians cannot open a Tier-II account.
- It can be opened along with a Tier-II account.
- In case it is mandatory for government subscribers to have a Tier-I account, they can also open a Tier-II account.
NPS Other Pages
- HDFC National Pension Scheme
- ICICI Bank National Pension System
- NPS Withdrawal Forms
- Axis Bank National Pension System
- Bank of Baroda National Pension System
- Bank of Maharashtra New Pension Scheme
- Central bank of India New Pension Scheme
- South Indian Bank New Pension Scheme
- Canara Bank New Pension System
- Corporation Bank New Pension Scheme
- Federal Bank New Pension Scheme
- IDBI New Pension Scheme