What is Tier II tax saver in NPS?
Tier II is an add-on account which provides you the flexibility to invest and withdraw from various schemes available in NPS without any exit load. You can save the details captured during Tier II Activation process at regular intervals by clicking on ‘Save and Proceed’.
Is NPS Tier 2 account good for investment?
There is no limitation on the maximum amount you can invest in both the accounts. The Tier-II account works just like the NPS Tier-I account in terms of investment options and can be opened by all citizens in the age group of 18 to 65 years.
How is NPS taxed?
NPS is not fully tax exempt presently. The income accrued during continuance of the account is also tax free. However, at the time of maturity of the NPS account only 60\% of the corpus accumulated can be withdrawn tax free and for the balance 40\% you have to buy an annuity from a life insurance company.
How are gains in NPS Tier 2 taxed?
NPS Tier 2 is eligible for tax deduction under Section 80C for government employees. There is no clarity on how the gains in NPS Tier 2 will be taxed for such employees. The Tier 2 account would also have a lock-in of 3 years.
Will LTCG impact pension investment in NPS?
As far as pension investment in NPS is concerned, LTCG will not have impact, said a top official of pension regulator PFRDA, which manages NPS. For the benefit of subscribers, NPS or National Pension System offers two types of accounts: Tier I and Tier II.
What is the lock-in period of NPS Tier 2 account?
The Tier 2 account would also have a lock-in of 3 years. However these tax rules have not yet been notified by the Government. There is no tax deduction on NPS Tier 2 for private sector employees and the gains in the NPS Tier 2 are also taxable at slab rate.
Is NPS Tier II an open-ended mutual fund?
The reason: if you are new to investing and have a Tier I NPS account, you could consider NPS Tier II as an open-ended mutual fund to invest towards any surplus savings. The limited equity exposure of up to 75\% in the case of NPS, limits the risk of volatility with equity, which is much desired by first-time investors.