#NPS Tier-2 account- Ambiguity on #tax treatment at the time of withdrawal of funds

Recently saw an article of Value research online about ," how one should use Tier- 2 account" of NPS as an alternate to mutual funds. 

While NPS is definitely a low-cost product, there is lot of ambiguity over taxation rules at the time of withdrawal.

For those who are not aware, NPS Tier-2 is an optional account over tier-1 which has no withdrawal restrictions like tier-1.
For investment allocation in tier -2, you can choose your investments to be in active choice mode or auto choice mode to be split across across Equity, Corporate bonds and Government bonds. (NPS Booklet)

Articles from the web on tax treatment at the time of withdrawal  of funds from Tier-2 account.

1. Tax Treatment of Tier II Account is similar to that of Debt Mutual Fund: On taxation front, as per the views from various CAs and tax consultants, the tax treatment on proceeds from Tier II NPS account would be similar to debt mutual funds. Indexation benefits can be availed of. (source)
2. Valueresearch article says, the taxation is the same as any other fixed income or debt alternative.
3. Tax angle from Mint  A crucial difference between the two accounts is the tax treatment. Says Rani S. Nair, executive director, PFRDA: “Since Tier II does not have any lock-in period, it does not qualify for a tax deduction under section 80C.” However, right now, the pension regulator is divided on the tax treatment of the amount withdrawn. Says Nair: “We are yet to hear from the tax department on the tax implications.” Going by the product structure, withdrawals will attract capital gains tax. Withdrawals before one year will attract short-term capital gains that is taxed at the marginal rate (the highest tax rate on your income slab). For withdrawals after one year, you will have to pay long-term capital gains—10% for debt funds and nil for equity funds.

Some articles talk about

• Treatment of the whole amount as "debt"- while others talk  about 
• Separate tax treatment for withdrawal from equity and debt portion of tier-2 account. ( Tier 2 withdrawal request online on CRA NSDL provides the option of  lump sum or scheme wise withdrawal- so you can actually withdraw from Equity or Corporate or Government units specifically)

So, as another article says

The problem is the ambiguity over taxation. "There is no clarity on tax treatment of Tier II NPS returns. It is very subjective and different people have different views on the matter.

So, Lets keep our fingers crossed till any formal judgment is out. Please leave a comment ,if you have any valid input.