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How to open an NPS Tier 2 account

Updated on :  

08 min read.

Calculate monthly Pension & Tax Benefits through Cleartax NPS Calculator.

The National Pension Scheme regulated by PFRDA is a pension program, a social security initiative by the Central Government. This scheme is open for all Indian citizens on a voluntary basis. Everyone registering under NPS will have a Tier 1 account by default. The citizens can voluntarily opt for having an NPS Tier II account.

Let us understand Tier II account in detail under the following topics:

About Tier II Account

Tier I account is the default account that gets opened when you open an NPS account. Tier II, on the other hand, is a voluntary account. When you invest here, it gets invested in different funds – similar to a mutual fund. There is no lock-in period, which means the account holder can withdraw the money any time. The Tier II account is useful for those who want to make additional contributions to existing NPS, and build a huge corpus towards retirement.

You also have an option to choose the category of funds where investments can be made. However, only 50% of the amount can be invested in equity funds. If you don’t choose, the fund automatically selects instruments based on your income, age and risk profile.

How to Open an NPS Tier II Account

Offline:

Any person (subscriber), who has an active Tier I account can apply for a Tier II account.

The person has to follow the following steps to apply offline:

  • The Tier II account has to be opened through the “Subscriber’s POP-SP”.
  • The applicant needs to download the Annexure 1: Tier II Details form and send it duly filled to the POP-SP. You will find this form under the ‘Subscriber Registration’ section.
  • Also, you must provide your bank account details to open a Tier II account because any withdrawals will be directly transferred to your bank account.

Online:

Let us see how it is done online :

Step 1: Visit the electronic National Pension system (eNPS). Click on “Tier II activation” tab.

eNPS Tier 2 Activation page

Here, you can also view this in Hindi or English language.

Step 2: After clicking on Tier II activation, a window opens which asks for details like Permanent Retirement Account Number (PRAN), Date of Birth, and PAN. Click on ‘Verify PRAN’ to receive OTP on your registered mobile number.

Tier 2 Activation page

Step 3: Enter the received OTP in the space provided and click on ‘Continue’.

Step 4: Fill in your bank account details and click on ‘Validate Aadhaar’.

Step 5: An acknowledgement number will be displayed on the screen. Note down the number and click on ‘OK’.

Step 6: Now, choose a Pension Fund Manager (PFM) and specify the investment option on your choice, i.e. Auto or Active. Click on ‘Save and Proceed’.

Step 7: Enter the nominee details and click on ‘Save and Proceed’.

Step 8: Upload the scanned copy of the PAN card and a cancelled cheque. Once the documents are ready, click on ‘Upload’.

Step 9: Make the payment towards the NPS Tier-II account. Note that the minimum amount you can invest in the account is Rs.1,000.

Step 10: A receipt will be issued for the payment received.

Step 11: e-Sign the application using your Aadhaar number. An OTP will be sent to your registered mobile number.

Step 12: Enter the received OTP and submit.

Step 13: Upon e-Signing the application successfully, you must download your application, print it, put your signature on the printed form, and send it to NSDL’s head office located in Mumbai through a registered post.

Expected Returns from NPS Tier II Account Schemes

The return rates given below were updated as on 31 December 2020.

NPS Tier II Account Scheme E

 SBIPF LICPF UTIRSL ICICI PFKOTAK PF HDFC PFBIRLA PF
3 Months 24.11% 23.96% 24.32% 24.23% 21.78% 24.05% 22.99%
6 Months 34.70%34.77%36.09%36.38%32.40%34.80%32.08%
1 Year15.17%12.72%14.19%15.58%13.62%16.35%16.85%
2 Years 12.25%10.29%11.90%13.45%13.08%14.16%13.32%
3 Years 8.88%6.78%8.74%9.16%7.69%9.90%8.95%
5 Years 12.11%10.31%12.15%12.12%11.91%13.44%NA
7 Years 12.62%9.56%13.00%12.67%12.47%12.42%NA
10 Years 9.51%NA 9.48%9.33%9.37%NA NA
Since Inception 9.82%8.92%10.07%9.93%10.13%12.26%11.59%

NPS Tier II Scheme – C

 SBIPFLICPFUTIRSLICICI PFKOTAK PFHDFC PFBIRLA PF
3 Months 3.16%7.03%3.10%3.37%3.23%3.18%3.28%
6 Months 4.58%8.17%4.45%5.96%4.43%5.24%4.63%
1 Year 11.87%15.47%12.42%11.52%11.90%12.00%11.96%
2 Years 11.88%13.70%11.89%12.07%11.95%12.71%12.23%
3 Years 9.81%10.67%9.70%9.98%9.66%10.32%10.18%
5 Years 9.73%10.25%9.61%9.92%9.68%10.21%NA
7 Years 10.38%10.16%10.27%10.68%10.22%9.86%NA
10 Years 9.95%NA 10.07%10.60%9.99%NA NA
Since Inception 10.32%9.94%9.72%10.53%9.59%9.85%9.55%

NPS Tier II Scheme – G

 SBIPFLICPFUTIRSLICICI PFKOTAK PFHDFC PFBIRLA PF
3 Months 3.53%3.76%3.77%3.44%3.38%3.62%3.50%
6 Months 3.87%3.99%3.96%4.02%3.91%4.08%4.09%
1 Year 13.12%13.23%12.90%13.40%12.70%13.40%12.86%
2 Years 12.74%14.18%12.80%12.70%12.45%13.04%12.87%
3 Years 11.28%13.42%11.25%11.35%10.93%11.64%11.22%
5 Years 10.65%11.96%10.42%10.62%10.41%7.54%NA
7 Years 11.47%12.30%11.27%11.40%11.20%11.21%NA
10 Years 9.89%NA 9.47%10.03%9.67%NA NA
Since Inception 10.24%12.18%9.93%9.58%9.17%11.04%9.05%

Eligibility Criteria to open a Tier II Account

This scheme is open for all Indian citizens on a voluntary basis. Everyone registering under NPS must have a Tier I account by default, i.e. PRAN must be already provided. The citizens can voluntarily opt for having an NPS Tier II account.

Here are the eligibility criteria for Tier I account for your reference:

  • All citizens of India whether residing in India or not can open the account.
  • Age of the applicant must be between 18 years and 65 years. A separate set of rules are applicable for applicants aged between 60-65 years.

Further, you can also open a Tier-I and Tier-II accounts simultaneously.

How to Withdraw and Close a Tier II Account

Exit/withdrawal from the NPS account means closing the pension account and receiving the account balance in one form or another. As per PFRDA (Exists and Withdrawals under NPS) Regulations of 2015, the reason for an exit must be one of the following:

  • Normal Superannuation:

    In this case, 40% of the account balance must be used to purchase an Annuity that provides a monthly pension to the subscriber and the balance is paid in a lump sum. If the total corpus in the account is less than or equal to Rs.2 lakh as on the date of retirement, the subscriber can make a complete withdrawal.

  • Death:

    A minimum of 80% of the pension account balance must be used to purchase an annuity that provides a monthly pension to the spouse and the balance amount shall be paid as a lump sum to the nominee/legal heir. If the total corpus in the account is less than or equal to Rs.2 lakh as on the date of the death of the subscriber (government sector employee), the nominee/legal heir will have the right to choose a complete withdrawal.

  • Premature Exit:

    A minimum of 80% of the pension account balance must be used to purchase an annuity that provides a monthly pension to the subscriber and the balance amount shall be paid as a lump sum to the subscriber. If the total corpus in the account is less than or equal to Rs.1 lakh as on the date of resignation, the subscriber will have the right to make a complete withdrawal.

In the case of withdrawals from NPS Tier II Account offline:

Step 1: Submit a duly filled UOS-S12 form to the associated Points of Presence – Service Provider (POP-SP).

Step 2: The POP-SP will initiate processing the application.

Step 3: Over the next three days, the funds shall be transferred from the Trustee’s Bank to the subscriber’s bank account that is registered under the CRA system.

The withdrawal process can also be carried out online:

Step 1: Enter the User ID and IPIN on the CRA system within a period of 6 months before the age of superannuation/vesting date opted.

Step 2: Provide details, such as lump sum percentage of withdrawal, annuity percentage share details, annuity service provider details, bank details, nomination details, and others.

Benefits to NPS Tier II Account

  • Flexible withdrawals are allowed.
  • No exit load applicable.
  • No annual maintenance charges.
  • Transfer funds conveniently from Tier II account to Tier I account as and when required.
  • No minimum balance requirement.
  • Assign a nominee to the account who can receive the account proceeds.

Tax Implications of Tier II Account

The deposits made in the NPS Tier II accounts are eligible for an income tax deduction, under Section 80C of the Income Tax Act, for government employees. On the other hand, there is no income tax deduction offered on NPS Tier II deposits for private-sector employees and the gains in the NPS Tier 2 are taxable at the respective slab rates.

How to login to your NPS account for the first time?

Step 1: In order to log into your NPS account, you must have a 12-digit Permanent Retirement Account Number (PRAN). Submit the necessary documentation on the NSDL website or at the Point of Presence (POP) service providers to avail PRAN.

Step 2: Visit the eNPS login page https://enps.kfintech.com/login/login/.

Step 3: If you are a first-time visitor, click on the ‘Click here to generate or reset the password if you are a first time user’ option at the bottom of the page.

Tier 2 Activation page

Step 4: Enter PRAN, date of birth, and captcha to generate OTP and click on the ‘Submit’ button.

Tier 2 Activation page

Step 5: An OTP will be sent to your registered mobile number. Once you enter this OTP on the screen, your password will be confirmed.

Step 6: Now go back to the login screen and enter your PRAN, password, and captcha. Click on the ‘Login’ button.

Step 7: You will be redirected to the home page of your account.

What is the user ID for NPS login?

Your Permanent Retirement Account Number (PRAN) that is offered on registration for the NPS account will be your user ID to login to the eNPS-NSDL website.

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