TheBuyt Team
Have you opened an account under the Government-backed National Pension Scheme (NPS)? If not, you should open it soon. NPS creates an inflation-resistant retirement fund with tax benefits. Overall, it is a good investment option. On registering with NPS, by default, an NPS Tier I account is opened. However, you can voluntarily open an NPS Tier II account. NPS Tier I and Tier II accounts are identical in terms of charges, fund management, and chosen asset groups for investment. Nonetheless, an NPS Tier II account has its benefits.
Requirements for opening an NPS Tier II account
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You cannot open a Tier II account until you have been assigned a Tier I account and a PRAN number. In fact, the closure of the Tier I account automatically ceases the existence of the Tier II account.
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Only an Indian resident between the ages of 18 to 65 years can open an NPS Tier II account.
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Central Government employees have a mandatory three years lock-in period for an NPS Tier II account. On the other hand, private sector employees do not have a lock-in period for the Tier II account.
Benefits of an NPS Tier II account
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There are no restrictions on withdrawal from an NPS Tier II account. Thus, you can rely on this investment in a time of emergency.
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There is no exit load for withdrawing money from the Tier II account.
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You can close the NPS Tier II account by simply filling and submitting the account closing form at the nearest NPS Point-of-Presence.
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There is no minimum balance requirement for an NPS Tier II account.
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You can quickly transfer funds from the Tier II account to the Tier I account at any time.
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Central Government employees can deduct the investment in the NPS Tier II account from their income under Section 80C of the IT Act.
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There is no restriction on the contribution to the Tier II account. The initial investment should be a minimum of Rs.1, 000.
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At retirement, 40% of the account balance goes towards a pension, and the remaining is paid upfront. Withdrawal of the complete sum is possible only if the balance is equal to or less than Rs.2 lakhs.
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In the case of the death of the subscriber, 80% of the account balance goes towards a monthly pension to the spouse. The remaining lump sum amount is paid to the nominee or the legal successor. If the account balance is less than or equal to Rs.2 lakhs, the nominee or the legal successor can make a complete withdrawal.
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For a premature withdrawal, 80% of the account balance goes towards a monthly pension, while the remaining amount is paid as a lump sum amount. If the total balance is less than or equal to Rs.1 lakh on the date of closure, then complete withdrawal is possible.
While only a Tier I account is sufficient to subscribe to the NPS scheme, a Tier II account opens a box of opportunities. An option to withdraw money at any time without any penalty is quite an attractive prospect for the Tier II account.
