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What are the benefits of opening an NPS Tier 2 account, how helpful in retirement planning

NPS Tier 2 Account: You can open Tier 2 account only if you have a Tier 1 account. However these NRIs cannot take advantage of this.

NPS Tier 2 Account: NPS has proved to be of great use in retirement planning. Apart from adding money for retirement, it also gives an opportunity to invest in options like equity, debt, government bonds and corporate bonds according to age and risk profile. These investments are made through the pension schemes registered in the PFRDA. Apart from this, if you want to save tax, then NPS proves to be better than other options. Due to many tax saving investment options, the scope of 1.5 lakh of section 80C is small. In such a case, you can claim an additional exemption of up to Rs 50,000 under section 80CCD above the limit of Rs 1.5 lakh of section 80C for NPS.




Because NPS is a pension scheme of retirement, at the age of 60, you cannot withdraw this entire amount. On retirement, you will have to buy an annuity plan of 40% of the deposit amount, which will give you regular pension. You can withdraw the remaining 60 percent and there is no tax on it.

What is the difference between Tier 1 and Tier 2 account?

Tier 1 account of NPS is compulsory whereas Tier 2 account (NPS Tier 2 Account) is voluntary i.e. you can open Tier 2 account only if there is Tier 1 account. The difference between the two is that there are restrictions on withdrawing money from Tier 1 account whereas funds can be withdrawn from Tier 2 account. One has to invest at least 6,000 rupees in a financial year in NPS.

NPS Tier 2 Account: What are the benefits?

If you want to withdraw money before the age of 60 from a Tier 1 account, then there are restrictions on it. However, there is a facility to withdraw 25 percent of the funds for children’s higher education, marriage, or buying a house and for medical expenses. This facility is available when you have completed at least 3 years of NPS investment. But Tier 2 account gives flexibility in this case. You can withdraw money whenever you want.

NPS Tier 2 Account: On opening a Tier 2 account, you do not have to pay any additional maintenance charge. Also, you can save money for everyday needs in it because withdrawal is possible. Also, whenever you want, you can transfer money from it to a Tier 1 pension account. At the same time, there is no minimum balance maintained in Tier 2 account, nor is there any exit load. You can make a separate nomination for this account. Apart from all these advantages, another advantage is that you can choose a different investment plan from a Tier 1 account.

You can open a Tier 2 account only if you have a Tier 1 account. Although this facility is only for those living in India, NRIs cannot take advantage of it.

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