Investments (instaed of FD )in Tier- 2 of NPS as like mutual funds

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 Many investors keep -park  certain amount in FD with banks and NBFC, now a days most of the MF managers and financial advisors  ( may be (?)because of commisssion  they get) advise to park this amount in mutual funds,instead of FD's

 my query,  why not  park this amount  in Tier- 2 of NPS ( National Pension Scheme), which is also governed by PFRDA, and gives better returns as like mutual funds, any experts at this CA club forum , may kindly mention if any if 's and but's of  investments in Tier-2 of NPS

Replies (2)

NPS Tier II is not a fund registered under Section 10(23D) of the I-T Act, the equity investment will not be eligible to be as an equity-oriented fund. Consequently, it may not be eligible for long-term capital gains exemption under IT Act.

Unlike the FD, where only the interest is taxed, here the entire amount withdrawn is taxable. Also, unlike debt funds, investments in corporate debt and government plans of the NPS do not enjoy the indexation benefit. It is a big disadvantage and can bring down returns substantially. So, think carefully before considering the Tier-II NPS account as an alternative to fixed deposits and debt funds.

Otherwise, due to low cost structure it is better to other types of investments...

 At the same time, NPS tier 2 is for those conservative people , as in  NPS  one has to opt only 1 pension fund house, not as like MF, where there one has lot more opportunities of MF  to look into,(inclding switchover) secondly  NPS has max 50% exposure to equity


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