5 Reasons Why NPS Tier II Is Even More Attractive

After new rules on Tier II of NPS account have been notified by the finance ministry which has also now become a tax saving tool if maintained with a 3-year lock in for central government employees, has been rendered a far lucrative retirement planning avenue.

5 Reasons Why NPS Tier II Is Even More Attractive

As per the new rules, contribution to the NPS Tier II account is eligible for tax deduction as part of Section 80C up to the extent of Rs. 1.5 lakh in a financial year. And employees from the government sector need to contribute Rs. 1000 for the activation of the Tier II account while in the subsequent years need to contribute Rs. 250.

It is to be noted that for central government employees, maintaining a NPS account (Tier I) is mandatory while NPS Tier II is optional.

Here are things you should know about new NPS rules:

1. Tier II account now available for claiming tax deduction similar to other investments allowed as part of section 80C including PPF, ELSS etc.

2. Similar to ELSS or equity linked savings scheme, NPS tier II comes with the lowest lock in of 3 years for claiming tax benefits.

3. And after the said lock-in period of 3 years ends for NPS Tier II account, the other benefits such as those of liquidity can be availed by the NPS subscriber.

4. Furthermore, the investment in Tier II account is rather hassle free when compared to ELSS and can be compared to government's provident fund or GPF where short term cash withdrawal can be met, providing tax benefits.

5. And in a case if you own an NPS Tier I account, you just by visiting the NSDL's e-NPS site can open and maintain NPS Tier II account.

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