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Guidelines For NPS Tier II Tax Saver Scheme For Govt. Employees Released


The pension fund regulator PFRDA has released the operational guidelines for the NPS or National Pension Scheme Tier II account-Tax Saver Scheme, 2020. As per the schema, central government employees investing in NPS are eligible for the scheme. In July this year, the government has notified the NPS Tier II tax saving scheme for central government employees.

 Guidelines For NPS Tier II Tax Saver Scheme For Govt. Employees Released

If a government employee contributes towards NPS Tier II account then he or she is eligible for tax deduction under Section 80C up to Rs. 1.5 lakh in year, provided there is a lock-in of 3 years.

Thus, central government staff can now on have 3 NPS accounts to manage

1. Mandatory NPS Tier I account

2. NPS Tier II account providing free withdrawal with no tax benefit

3. NPS Tier II with tax benefit and a lock in of 3 years

Asset class allocation

To such Central government employees no investment choice shall be allowed for NPS scheme and the allocation in different assets shall be as below:

• Equity: 10 to 25 per cent ( As applicable to E-II)

• Debt: Up to 90 per cent ( As applicable to G-II and C-II)

• Cash/Money Market/Liquid funds: Up to 5 per cent

Pension Funds

There will be a choice given for pension funds and for the NPS Tier II tax saving scheme, 2020, investors can choose at max 3 pension funds separately. And the change in pension fund can be effected only after the end of 3 year lock-in period and such reinvestment will be deemed to be fresh investment and will be locked for another 3 years.

For non-government subscribers, investment in NPS is made to avail deduction in income and save on tax. Nonetheless for them, NPS Tier II account is an optional account which can be opened if one has a NPS Tier I account i.e. a default account that becomes operational or the initial contribution goes into this account on opening NPS account.


Though neglected, this account can be used to mobilize one's savings as it comes with free deposit and withdrawal option, meaning to say investor can contribute and withdraw any amount and at any time.

Read more about: nps nps tier ii pension
Story first published: Thursday, August 20, 2020, 7:20 [IST]
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