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

NPS equity funds and equity MFs invest in similar Indian stocks. Returns are comparable (9-11% p.a.). The difference is cost (NPS 0.01% vs MF 0.7-1.2%) 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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Quick Summary: NPS Tier 2 vs Mutual Fund

Choosing between NPS Tier 2 and Mutual Funds involves a trade-off between cost and tax. In FY 2026-27, NPS Tier 2 costs are ~0.01% but gains are taxed at slab rates, while Equity MFs cost 0.7-1.2% but offer a ₹1.25 Lakh LTCG exemption and a flat 12.5% tax rate.

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Regulatory Disclaimer · FY 2026-27

Last verified May 2026

Statutory Disclosure

Nature:Calculator platform and is NOT a SEBI-registered Investment Adviser. All calculations are indicative.

Risk:"Investments in securities market are subject to market risks. Read all related documents carefully before investing."

Consult a SEBI-registered IA or CA for personalised advice.

9 out of 10 traders in F&O incurred net losses (SEBI 2023). Tax estimates based on IT Act 2025. Trezoriq is not liable for financial decisions based on results.