Benefits and features of NPS Tier II Account

September 22, 2022 Finance Talk Valli Sarvani No comments

Tier II National Pension Scheme (NPS) Account is a pension account. Unlike a Tier I NPS account, a Tier II account is not mandatory.

That is, subscribers can contribute to the Tier II account voluntarily. However, this account does not provide tax benefits like Tier I NPS account. But, it has some benefits.

Here are the features and benefits of the NPS Tier II Account:

Those who have a Tier I NPS account can open a Tier II Account.
Any Indian resident between 18- 60 years of age can open this account.
The account can be opened both online and offline.
One needs to contribute ₹1,000 while opening an NPS Tier II Account.
There is no need to make an annual contribution to this account. However, the contribution should be in multiples of ₹250.
There is no limit on the maximum contribution to this account.
Also, no minimum balance is required in this account.
Subscribers need to pay activation and transaction charges. The account does not attract any additional annual maintenance charges.
Unlike the Tier I account, the Tier II account does not have a lock-in period. Subscribers can withdraw money from this account at any point time easily.
There is no exit load when you withdraw funds from this account.
But, you must note that investments made into this account are not tax-free. So withdrawals are taxed according to the time gap between the investment made into the account and funds withdrawn from the account.
Short-term capital gain tax is applicable if the funds are withdrawn within a year of investment.
On the other hand, long-term capital gain tax is applicable for the funds withdrawn after one year of investment.
The tax is 10 per cent for debt funds while it is nil for equity funds.
Subscribers can also move the funds to a Tier I account at any point.
They can opt for a different investment pattern from the Tier I account for this account.
A separate nomination facility is available for it.