NPS Rule Change: Credit Card Contribution Stopped in Level 2 Accounts

Modification of the NPS rule: The Pension Funds Regulatory and Development Authority (PFRDA) has decided to terminate the facility to pay contributions underwriting in National Pensions System (NPS) Tier 2 accounts. The PFRDA made its decision public through an official notification dated August 3, 2022. So after this decision by the PFRDA, credit card payment for NPS Tier 1 account will remain while card payment Level 2 account credit is no longer available to NPS account holders.

Notify of stopping credit card payment in NPS Level 2 account, Circular PFRDA said: “The Authority has decided to discontinue the subscription/contribution payment facility using credit card as the payment method in the NPS Tier II account. Accordingly, all PoPs are urged to stop accepting credit card as a method of payment for the NPS Tier-II account with immediate effect.”

The PFRDA has issued the Circular exercising its powers under Section 14 of the Pension Funds Regulation and Development Authority Act 2013 to protect the interests of policyholders and to regulate, promote and ensure orderly growth the national pension system and the pension schemes to which the law applies.

However, credit card payment for the NPS Level 1 account will continue. Credit card payments to invest in mutual funds or stocks are not encouraged, as these payments involve excessive leverage on high-interest funds. For example, NPS account holders opting to pay by credit card must pay a payment gateway fee of 0.60%. The over-indebtedness is even higher when we add the GST to it.

What to Know About NPS Level 2 Account

NPS Level 2 accounts are voluntary and an NPS Level 1 account is eligible to open an NPS Level 2 account. NPS account holders with a Level 2 account will not be eligible for income tax exemption on investments made in a Level 2 account. However, an NPS Level 2 account has flexible exit and withdrawal rules compared to the NPS Level 1 account.

Apart from this, only NPS account holders can open an NPS Tier 2 account who have a Tier 1 account. One can open an NPS Tier 2 account with a minimum investment of 1000. After that, the NPS account holder can contribute to the NPS Level 2 account in multiples of 250 with no upper limit.

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