NPS Tier 2 or mutual fund — which gives better returns?

NPS equity funds and equity MFs invest in similar Indian stocks. Returns are comparable (10-12% p.a.). The difference is cost (NPS 0.01% vs MF 0.5-1%) and tax (NPS: slab-rate; Equity MF: 12.5% LTCG above ₹1.25L). For 30% slab investors, large-corpus equity MFs often win on tax.

Can I switch from NPS Tier 2 to equity fund?

Yes — NPS Tier 2 has no lock-in for non-government subscribers. You can withdraw anytime and reinvest in equity MFs. However, the tax event on withdrawal (at slab rate) must be accounted for.

Does NPS Tier 2 have 80C benefit?

Only Central Government employees can claim 80C deduction on NPS Tier 2 contributions up to ₹1.5L/year, subject to a 3-year lock-in. All other NPS Tier 2 accounts have no tax deduction on contributions.

NPS Tier 2 vs Mutual FundFY 2026-27

Compare NPS Tier 2 ultra-low costs (0.01%) and slab taxation vs Equity MF's 12.5% LTCG and higher expense ratios.

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Regulatory Disclaimer · FY 2026-27

Last verified May 2026

Statutory Disclosure

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