NPS Tier 2 Account Advantages and Disadvantages

Frequently Asked Questions

• Does Tier 2 NPS have tax benefits?

  No, Tier 2 NPS contributions don't offer any tax benefits. Unlike Tier 1, you can't deduct your contributions from taxable income.

• Is NPS Tier 2 better than FD?

  Not necessarily. Tier 2 offers flexibility and higher potential returns than FDs but comes with market risks and no guaranteed returns. It depends on your investment goals and risk tolerance.

• Is NPS Tier 2 good for the short term?

  No, Tier 2 NPS isn't ideal for short-term goals. It's meant for long-term wealth creation due to lock-in periods and potential market volatility.

• How the policyholder may avail NPS tier 2 tax benefit?

  You can not avail of tax benefits under section 80c and 10(10D) on your contributions to the NPS Tier 2 account. For a better understanding of nps tax benefits, use policy bazaar nps calculator.

• Can a private employee enjoy the NPS tier 2 tax benefit?

  No, private employees cannot enjoy tax benefits on contributions made to their Tier 2 NPS accounts.

• How can I make a withdrawal from an NPS tier 2 account?

  To withdraw from the NPS Tier 2 account, you must submit a duly filled UOS-S12 (form) to the associated POP-SP (Power of presence- service provider).

• Can I enjoy NPS tier 2 tax benefits in case of withdrawal from NPS tier 2 account?

  In case of withdrawal from an NPS tier 2 account, you cannot avail of the NPS tier 2 tax benefit.

• Are NRIs eligible to open an NPS Tier 2 account?

  Yes, an NRI is eligible to open an NPS Tier 2 account. The country in which you are residing does not matter. You just need to be a citizen of India. If your citizenship is changed, your account will be closed.

• Who is the regulator for NPS?

  Pension Fund Regulatory and Development Authority is an authority set up by the Government of India, which regulates pension funds to protect the interests of subscribers. All the activities, including withdrawal from NPS tier 2 and NPS tier 2 tax benefits are operated by its regulator.

• Are withdrawal from NPS tier 2 proceeds provided through cash or demand draft?

  No, withdrawal from NPS tier 2 proceeds are credited directly to the bank account of the subscriber. Therefore, the subscriber must have a bank account before creating an NPS account.

• Who is a POP-SP, and what is their role?

  Points of Presence are the initial interaction points that provide several customer services to the NPS subscriber. They act as collection points and extend their services for withdrawal from NPS tier 2 accounts.

• What are the documents that are needed to be submitted for opening an NPS account?

  Several documents are needed to open an NPS account-

  • Subscriber Registration Form

  • Identity Verification 

  • Address Proof

  • Age/Date of Birth Proof

  Identity, address, and DOB can be verified through a single document, i.e., an Aadhar card but sometimes separate documents are required.

• Can I open a tier 2 account without a tier 1 account?

  No, you cannot open a Tier 2 account without a Tier 1 account. The Tier 2 account is considered an add-on feature to the NPS Tier 1 account. In order to activate a Tier 2 account, you must already have a Tier 1 account established and possess a Permanent Retirement Account Number (PRAN).