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How You Can Run NPS Tier II Account Like A Savings Account Without Cheque Book?


The National Pension System (NPS) Tier II Account is an add-on account that allows you the versatility to contribute and withdraw from multiple NPS schemes without any exit charge. NPS Tier II account has no lock in duration, whereas NPS Tier I Account has a lock in until 60 years of your age. Investment specialists claim investors can use the NPS Tier II Account as a replacement for the savings account of a bank. You can run the NPS tier II account as a savings account without a cheque book, but for each transaction you will have to pay transaction fees. Without holding an NPS Tier I account, depositors can not launch an NPS Tier II account. But if you're a central government employee and have received a deduction under Section 80C for investment rendered to the Tier II account, the contribution made to the NPS Tier II account is not liable for any tax benefits, in which circumstance the amount so deposited will have 3 years of lock-in duration.


Under the NPS, NPS Tier II holders are entitled to pick any fund manager. Eight fund managers, namely SBI, UTI, LIC, HDFC, ICICI, Kotak, Reliance and Aditya Birla Sun Life Pension Fund, are currently in operation. For the NPS Tier 2 account, there is no minimum balance criteria or a minimum annual contribution. As long as the taxation of withdrawals from the NPS Tier II Account is important, no clear cut-off clause is given by the issuer. That being said, only the benefits on withdrawals will be taxable,

How You Can Run NPS Tier II Account Like A Savings Account Without Cheque Book?

5 Reasons Why You Must Go For NPS Tier II Account

Two types of accounts are offered by the National Pension System (NPS): NPS Tier I and NPS Tier II. Tier I is a mandatory pension account, whereas Tier II is an additional facility for owners of NPS Tier I accounts that can be accessed at the subscriber's convenience. The NPS Tier-2 account is market-related and there are some benefits, according to the PFRDA or Pension Fund Regulatory and Development Body, for which one can have a more transparent NPS Tier-2 account:

  • In order to benefit from competent fund management to achieve superior returns, an NPS Tier II subscriber is welcome to select any of the approved Pension Fund (PF) and Investment Options, as in the NPS Tier I account.
  • NPS is a market-linked offering and can evaluate an acceptable asset allocation pattern (including equity, corporate bonds and government securities) under the specified limit to derive maximum returns, based on the risk tolerance of the subscriber.
  • NPS holds the advantage of being the nation's cheapest possible pension product. Due to efficiency of scope in system implementation processes, the overall costs are minimal in NPS. Also, because of the compounding impact and negligible costs incurred by the subscriber, accumulation of the retirement corpus over a period is intensified.
  • For Central Government employees subject to a lock-in of 3 years, up to Rs 1.5 lakhs under section 80C of the Income Tax Act, 1961, special tax advantages on contributions made to Tier II are open. The capital gains resulting from investments in Tier II are subject to taxation at a nominal rate
  • It is possible to run the NPS Tier II account (including withdrawals) using an online/mobile application. Subscribers are now eligible to transfer funds to NPS Tier I from their Tier II account (pension account).
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