SEO Sai Gr. Hosp.
196938 Points
Joined July 2016
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Unlike the FD, where only the interest is taxed, here the entire amount withdrawn is taxable.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...