Government-backed and PFRDA-regulated, NPS is among the most popular schemes for retirement planning. Indians and NRIs can invest in the scheme by opening an NPS Tier 1 or NPS Tier 2 account. NPS Tier 1 and Tier 2 accounts have similarities and differences that aid your investment needs and preferences. Opening a Tier 1 account is mandatory for any investment you make in the NPS scheme.
NPS Tier 2 account, on the other hand, is not compulsory but available only if you have a Tier 1 account. Moreover, you can enjoy tax benefits by investing through NPS Tier 1 and Tier 2 accounts. The distinctive features of an NPS Tier 2 account include no exit load or restriction on withdrawal and more. Understanding these distinctions and the features of a Tier 2 account can help you make informed decisions.
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Read on to learn more about an NPS Tier 2 account, its features, eligibility, how to open it, and more, read on.
Features and Benefits of NPS Tier 2 Account
Both NPS Tier 1 and Tier 2 accounts have a host of benefits that can help you make the most of your investment. Given below are the top features and benefits of an NPS Tier 2 account:
– Flexible investment process allowing you to begin your investment with a few clicks
– Option to choose investment options different from Tier 1 account to spread your investment across asset classes
– Portability to keep your investment intact even if you change your job or location
– Penalty-free withdrawals allow you to meet any emergency needs without any stress
– Minimal investment requirements to invest without straining your finances
Eligibility Requirements for NPS Tier 2 Account
Before beginning your investment in an NPS Tier 2 account, meeting the eligibility requirements is an essential part you cannot overlook.
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Given below are the requirements you need to meet to qualify for NPS Tier 2 account:
– Should have an active NPS Tier 1 account
– Must be a citizen of India (Available to residents and non-residents)
– Should be between the age of 18 and 60
– Should have an active bank account
– Should be KYC (Know Your Customer) compliant
– Have a value PAN card issued by the Income Tax Department
Documents Required for NPS Tier 2 Account
After knowing the eligibility requirement, knowing what documents you need to have is equally important. This will help you keep the required documentation ready and enjoy a seamless account opening process. Given below are the general documents you need to submit:
– Cancelled cheque for bank details
– PAN card
– PRAN card
– Accurately filled registration form
How to Open an NPS Tier 2 Account
Opening an NPS Tier 2 account is simple, quick, and hassle-free. You can choose between an online or an offline process as per your convenience.
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Follow the steps outlined below to open an NPS Tier 2 account online and offline:
Online
– Visit the NPS-NSDL website
– Navigate to the National Pension System section
– Click on Tier 2 to activate the pop-up displayed on the screen
– Enter the required details (PRAN, PAN, and captcha)
– Verify your PRAN
– Make the minimum contribution to activate your NPS Tier 2 account
Offline
– Choose a PoP (Point of Presence) service provider authorised by NPS Trust
– Get Annexure 1 from PoP-SP or on the NPS-NSDL website
– Choose investment details as per your preference
– Submit the form and documents needed
– Make the minimum investment to activate your NPS Tier 2 account
While opening the account, ensure that you submit all the necessary documents and that the form is accurately filled. Provide the correct bank details to ensure a smoother process in the future. Lastly, ensure that you submit the nominee details accurately.
Withdrawal and Taxation
Unlike an NPS Tier 1 account, you can withdraw from a Tier 2 account as and when needed without any penalties. This gives your freedom to access your funds whenever you want. Keep in mind that you cannot close your NPS Tier 2 account if the Tier 1 account is active.
To close the account, you will need to close the tier 1 account too. Upon closure, you will receive the funds in a lump sum manner. In addition, remember that the tax benefits of the NPS Tier 2 account are only available to Central Government employees.
Now that you know the steps to open an NPS Tier 2 account be sure to open the account and make additional investment after considering all the factors. This includes tax implications and benefits available. Keep in mind that you cannot allocate the funds to this account.
Remember that investing via NPS Tier 1 and Tier 2 is voluntary and not mandatory. If you choose to invest in a low-risk investment option, you can consider other options, as NPS has a certain degree of risk. Be sure to invest as per your risk tolerance and financial goals.
