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Capital tax gain on NPS Tier 2

DR SUNDEEP NIGAM (DOCTOR) (73 Points)

07 May 2021

What are the income tax liability on switching fund from Tier 2 NPS to Tier 1 NPS.

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7 Replies

CMA Poornima Madhava (CMA) (13112 Points)
Replied 08 May 2021

You get 80c deductions and better interest rates under tier 1 account as compared to tier 2 account under NPS.

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DR SUNDEEP NIGAM (DOCTOR) (73 Points)
Replied 08 May 2021

Will I have to pay capital tax gain on switching from tier 2 to tier 1 NPS

CMA Poornima Madhava (CMA) (13112 Points)
Replied 08 May 2021

I think tier 2 account is considered similar to a savings account and in general, interest is taxed. There is no express provision in IT act in this regard I think.

SUSHANT BIDAYE (597 Points)
Replied 08 May 2021

There is no interest on nps tier 2.

only capital gains.

in my on switch,. you have to calculate normal capital gains and pay tax accordingly.

DR SUNDEEP NIGAM (DOCTOR) (73 Points)
Replied 08 May 2021

Nps has informed me that switching is not shown in voluntary transaction statement hence no capital tax gain on it

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CMA Poornima Madhava (CMA) (13112 Points)
Replied 08 May 2021

Yes, right. Also because Tier 2 account is treated as savings account as per the answer to FAQ from NPS Trust, I think it would mislead if capital gain is attracted.

SUSHANT BIDAYE (597 Points)
Replied 08 May 2021

It is a news to me.

I don't know how NPS can say that unless they have any cbdt circular to back them up.

as per my understanding , both nps tier 1 & 2 are independent assets and so capital gains applicable on switch.

unless there is a cbdt circular or so