There is bad news for NPS Tier-2 account holders. Bad news for those who pay their subscription or contribution to their NPS Tier-2 account through credit card. This is because PFRDA means Pension Fund Regulatory And Development Authority has decided not to accept payment of subscriptions through credit cards in NPS Tier-II accounts. The regulatory body has put an immediate ban on it by instructing all the Points of Presence (PoP). PFRDA has given this information through a circular issued on 3 August. However, a credit card payment facility is still available for NPS Tier-I accounts.
What is NPS
NPS i.e. National Pension System is a pension scheme. Along with giving you the facility of investment, it also allows you to claim tax benefits on it. The deduction can be claimed in NPS under section 80CCD(1) for investments up to Rs.1.5 lakh. This reduces the tax liability. Till May this year, the number of people who put money in different schemes of NPS was more than 5.3 crores. NPS Tier II account is a voluntary account, this account can be opened by a subscriber-only if he has an NPS Tier I account. Tier II account provides an easy facility for withdrawing money closing the account. But the bad aspect is that there is no tax exemption on the contribution made in it. While POP is those service providers who insure that you can run your NPS account without any problem. This POP is appointed by PFRDA itself.
Now let’s understand why PFRDA has taken this step. The regulatory body has taken this decision to protect the interests of the subscribers. Also, the motive behind this step is to monitor and promote National Pension System, Pension Schemes, etc. . Experts say that the motive behind this is to prevent NPS-2 accounts from becoming trading accounts. Since these accounts have the flexibility to withdraw money, people were taking money from loans i.e. credit cards, and using it in equity through NPS account That is, people were using savings instruments for share trading… so this is also a big reason why PFRDA wants to stop such investments…