Here is an FAQ on the NPS Tier II account and clarifications on the proposed tax saving benefits.

What is a Tier 2 NPS Account?

This is a mutual fund you can invest with no lock-in period and no obligation to buy a pension (annuity) like with Tier 1. Please note that Tier 1 is also a mutual fund. You cannot open a Tier 2 account without a Tier 1 account.

Can I get tax saving benefit with a tier II account?

Non-central government employees cannot use Tier II for tax saving. From 1st April 2019 onwards central government employees with mandatory NPS accounts can save tax with a tier II account. However, the total tax saving benefit will be limited to 1.5 lakh under section 80 C. That is, if a central government employee invests Rs. 1 lakh in Tier I, then Rs. 50,000 than be invested in Tier II for tax saving under 80 C.

What is the taxation for NPS Tier II investments?

There is no official information in this regard! When I asked NPS authorities regarding this, they only said a switch of money from Tier II to Tier I is non-taxable.

What is the minimum contribution per year for Tier II

It is Rs. 2000 a year with each contribution being at least Rs. 250 and Rs. 1000 as the minimum contribution when opening the account.

What are the investment options under Tier II?

You can invest 50% in equity (E) and no more. Rest can be in government bonds (G) or corporate bonds (C).

Should I invest a Tier II account if I have a Tier I account?

There is no benefit in doing so. Use a mutual fund invest.