NPS Tier 2 Withdrawal | Rules | Taxation | Procedure | Time | Charges

NPS Tier 2 Account

The NPS Tier 2 Account is an optional facility provided to NPS Tier 1 account holder. Hence, it is not mandatory to open a Tier 2 account to invest in NPS and can be opened at the subscriber’s discretion.
Though, it is required to have the primary Tier 1 account to open a Tier 2 account.
Many investors choose to open a Tier 2 account due to the benefits that the account provides.
The account provides for quick and efficient withdrawals with no extra annual maintenance charge to cover.
The money can be used to cover your immediate emergency and regular expenses.
Additionally, unlike a Tier 1 account, amounts in a Tier 2 are not tied-up with a lock-in period and subscriber can withdrawn at any point of time.
Now let’s discuss about more NPS Tier 2 withdrawal, procedure, rules and tax.

Also Read NPS Tier 2 Returns | NPS Tier 2 Tax Benefit 2021

Withdrawal Rules

NPS Tier 2 comes without any withdrawal rules as well as no lock-in period.
This is main advantage of Tier 2 account.

Subscriber can withdraw amount at any time from this account using offline and online process.
However, one catch is here for government employees, there is a lock-in of 3 years who are investing in Tier 2 to avail of a tax deduction u/s 80C.
This tax benefit is unavailable for the non government employee.

Also Read NPS Rate of Interest : Best Fund Manager for NPS 2021

Tax on NPS Tier 2 Withdrawal

Subscriber can withdraw amount just like in bank’s fixed deposit. However, there is a important point,
where only the interest is taxed in FD. Here the entire amount withdrawn is taxable.

Also, not like debt funds, investments in corporate(Assist Class C) and government (Assist Class G) scheme of the Tier 2 do not enjoy the indexation advantage. It is a major drawback and can bring down returns substantially.

NPS Tier 2 account come without tax exemption.
The entire amount is taxed depending upon the tax status of the subscriber.
Debt mutual funds (MFs) give the advantage of indexation, while gains from equity funds held for more than a year are not taxed.

We have written to the Central Board of Direct Taxes.
We have requested for an exemption and that the Tier 2 account be treated like a mutual fund(MF).

Pension Fund Regulatory and Development Authority (PFRDA)

For instance, Tier 2 A/C will yield INR3.37 lakh if a any subscriber invests INR50,000 a financial year at 15% over 5 years.
If the same subscriber invests in an income funds, he will gather INR3.17 lakh, supposing 12% return.

Although, the Tier 2 benefit fades away if we separate post-tax returns. The money in hand would be approximate INR2.35 lakh (supposing IT slab 30%) for Tier 2 and INR3.15 lakh for the income fund.

This is because withdrawal from the Tier 2 A/C would be taxed as per the subscriber’s income tax slab, while the capital gains tax from the funds would be taxed at 20% (in 2020) with indexation.
Therefore, consider the withdrawal aspects before being bowled over by the low cost of Tier 2.

Also Read NPS vs PPF : NPS vs APY – Select the Best Retirement Plan

NPS Tier 2 Withdrawal Procedure

Tier 2 Account offers liquidity of amount at any time with easy way.
Let us now learn withdrawal procedure through online and offline.

How to Withdraw From NPS Tier 2 through Online?

Time needed: 10 minutes.

NPS Tier 2 withdrawal through following procedure:

  1. Login

    Log in to eNPS using registered User ID and password.
    NPS Tier 2 Withdrawal

  2. Initiate Withdrawal Request

    Click on “Initiate Withdrawal Request” option under the “Exit Withdrawal Request” tab.

    Initiate Withdrawal Request

  3. Tier 2 Partial Withdrawal

    Next, select the “Tier 2 Partial Withdrawal” in “Withdrawal due to”.
    Tier 2 Partial Withdrawal

  4. Units/Lumpsum

    Now choose the “Scheme wise Units Withdrawal” or “Lumpsum Withdrawal” option in “Partial Withdrawal Option” and then click on “Submit” button.
    Scheme wise Units Withdrawal

  5. Withdrawal Amount or Total Holdings

    Enter amount or unit in “Withdrawal Amount/Units” option and click on “Submit”.
    Withdrawal Amount or Total Holdings

  6. Verification Process

    Withdrawal application will verified and authorized by the associated POP.
    NPS team take 2–3 working days for transfer amount from NSDL account to subscriber bank account.

    Verification Process

  7. Status

    Subscriber can also verify withdrawal request status by “Withdrawal Request Status View” option under “ Exit Withdrawal Request” tab.
    Status

The subscriber can also make withdrawal process via offline.

Offline Procedure

  1. The subscriber must submit a below duly filled form at the nearby Points of Presence-Service Providers (i.e. POP-SP).
    NPS Tier 2 withdrawal Form
  2. Following documents are required to be submitted along with the withdrawal forms in order to settle the claims:
    Attested copy of PRAN card.
    Attested copy of proof of identity (e. g. Passport, Aadhar Card, PAN Card, valid Driving License, Voter ID Card etc.).
    Attested copy of proof of address (e. g. Passport, Aadhar Card, Valid Driving License, Voter ID Card etc.).
    Cancelled cheque (containing Subscriber Name, Bank Account Number and IFSC Code) or Bank Certificate containing Name, Bank Account Number and IFSC code, for direct credit or electronic transfer.
  3. The Service Providers will begin the withdrawal request on behalf of the accountholder.
  4. The redemption amount shall depend on the funds of investment made and the applicable NAV at the time of withdrawal.

Let us now learn withdrawal timeline and charges.

Also Read – NPS Contribution: Online and Offline | Contribution by employer 2020-21

NPS Tier 2 Withdrawal Timeline

Withdrawal Timeline if you processed through online

PFRDA take 2 to 3 working days for transfer amount from NPS Tier 2 account to subscriber registered bank account.

Through offline

The PFRDA will begin the withdrawal request and give the money within 3 working days after the day of form submission.

Withdrawal Charges

PFRDA will charge Rs 25 with service tax for withdrawal and account’s switch.

Also Read Understanding The Background of “What is Tier 1 and Tier 2 in NPS”

NPS Contact Details

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Name of the OfficialMs. Manjiri S. Salvi
Contact detailsTel No. 022 24994274
Email ID – npsclaimassist@nsdl.co.in
Escalation LevelLevel 1
Name of the OfficialMr. Dinesh Dalvi
Contact detailsFax No. – 022 24952594
Email ID – dinesh.dalvi@nsdl.co.in
Escalation LevelLevel 2
Name of the OfficialMr. Mandar Karlekar
Name of the OfficialFax No. – 022 24994974
Email ID – mandark@nsdl.co.in
Source – NPS
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