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NPS Tier 2 Account In India: Benefits and Eligibility

The NPS Tier 2 account is a pension account provided by the Government of India to encourage the habit of saving among individuals. You can open this account with a small initial amount; there are no mandatory annual deposits here. You can freely withdraw funds from this account as and when you need.
 

Post-retirement financial planning is essential to lead a respectable and stress-free life in your later years. The Government of India provides a pension account in the form of a retirement plan to Indian citizens for this purpose. 
 

The National Pension Scheme or the NPS is a scheme that promotes the habit of saving in individuals. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
 

There are 2 types of accounts under the NPS, Tier 1 and Tier 2 accounts. While the Tier 1 NPS is a mandatory scheme, the Tier 2 account NPS is a voluntary one. 
 

Let us understand the eligibility, benefits, and features of an NPS Tier 2 account in detail.

What is an NPS Tier 2 Account?

The NPS Tier 2 account is a voluntary account that you can open if you already have an existing NPS Tier 1 account. You can open this account with a minimum fund value of ₹1000. 
 

Unlike a Tier 1 account, where you must make an annual contribution of a minimum of ₹1000, there is no compulsion to make such annual contributions in the Tier 2 account. However, if you want to contribute to the NPS Tier 2 account, it should be in the multiples of ₹250 only. 
 

The Tier 2 account NPS is a flexible account in terms of deposits and withdrawals. There is no maximum limit to the maximum contribution you can make to this account. Additionally, there is no exit load or penalty if you withdraw money from the account. You can freely make multiple withdrawals from the NPS Tier 2 account without paying any charges.

Features of an NPS Tier 2 Account

  • It is mandatory to have an NPS Tier 1 account and a bank account to open an NPS Tier 2 account. 

  • You can choose from 4 asset classes to invest your money in the NPS Tier 2 scheme. These are corporate bonds, government securities, equity instruments, and alternative investment funds. 

  • You can also choose to customise your investment portfolio or go with the automatic allocation portfolio. 

  • There are no NPS Tier 2 tax* benefits for self-employed individuals or people employed in the private sector. 

  • The NPS Tier 2 eligibility for tax benefits is that you should be employed with the Indian Government. Individuals employed with the Government sector can avail of NPS Tier 2 tax saver benefits of up to ₹1.5 lakh for a lock-in period of 3 years on their investment. These tax benefits are available under the Section 80C of the Income Tax Act.

Benefits of an NPS Tier 2 Account

  • The biggest benefit of an NPS Tier 2 account is the flexibility of deposits and withdrawals it offers. 

  • There is no requirement to maintain a minimum balance in an NPS Tier 2 account. 

  • You need not pay an annual maintenance fee to maintain your NPS Tier 2 account. 

  • These accounts come with a nomination facility. 

  • You can move your funds from this account to the primary account or the NPS Tier 1 account whenever necessary. 

  • You can opt for a different investment pattern from the Tier 1 account for the Tier 2 account. 

  • You can use this account to maintain a corpus for your day-to-day expenses or for emergency purposes. 

  • The account has transparent investment rules and is regularly monitored and regulated by the authorities.

Eligibility Criteria to Open an NPS Tier 2 Account

  • To open an NPS Tier 2 account, you should be a citizen of India. Both resident and non-resident citizens of India are eligible to open this account. 

  • Your age should be between 18 to 65 years to open this account. 

  • You must have a minimum of ₹1000 to open the account. 

  • You must have an active NPS Tier 1 account to open this account.

How to Open an NPS Tier 2 Account?
 

Offline Procedure to Open an NPS Tier 2 Account

To complete the offline registration process for opening this account, follow these steps:
 

  1. Locate your nearest Point of Presence - Service Provider (POP-SP) to carry out the registration process. 

  2. Collect the registration form from the POP-SP and fill it out. 

  3. Alternatively, you can also download the form online and fill it out. 

  4. Provide additional information, such as bank details, details of the account nominee, the choice between active/auto investment mode, the fund manager you want to choose, etc. 

  5. Submit copies of your PAN, Aadhar card, etc., along with the registration form. 

  6. Submit all the above-mentioned documents and details, and your NPS Tier 2 account opening process will begin. 
     

Online Procedure to Open an NPS Tier 2 Account

To complete the online registration process for opening this account, follow these steps:
 

  1. Visit the eNPS web portal and click on the ‘National Pension System’ option. 

  2. Select the Tier 2 Activation option. 

  3. You will be directed to another page where you must provide details such as your date of birth, PAN details, and PRAN (Permanent Retirement Account Number) details. 

  4. Your PRAN details will be verified with your Tier 1 account, and your Tier 2 account will be activated.

Wrapping Up
 

There are several retirement plans in India for individuals, which can help create a corpus to support the post-retirement financial needs of people. The NPS Tier 2 scheme is one of them. You can open this account for an amount as low as ₹1000 and enjoy multiple deposits in the multiples of ₹250 and charge-free withdrawals from your account.

Peaceful Retirement Awaits: Discover Your Perfect Pension Plan

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Frequently Asked Questions

Can I withdraw the full amount from NPS Tier 2?

You can withdraw any amount from the NPS Tier 2 account at any time. Moreover, you can withdraw the entire amount at maturity as per the rules, subject to tax implications.

What is the process to withdraw from the NPS Tier 2 account?

  • Fill out the UOS-S12 form for withdrawal. 

  • Submit the form to the Point of Presence - Service Provider (POP-SP) you are registered with.

  • The redemption amount depends on the Net Asset Value at the time of redemption.

  • Once the form is submitted, the funds will be transferred within 3 to 4 business days into your bank account.

What documents do I need to open an NPS Tier 2 account?

  • Completely filled out registration form.

  • Identity Proof 

  • Address Proof

  • Age/Date of Birth Proof

Disclaimers

  •  Insurance cover is available under the product.

  •  The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  •  Tax:*Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.