Benefits of the NPS Tier-II tax-saving scheme

What are the benefits of the NPS Tier-II tax-saving scheme?
- L Sirisha G

This scheme was introduced last year and fetches deduction under Section 80C. Just like an ELSS, it comes with a three-year lock-in but there are some frills attached. One is that it is available only for central-government employees. So for a vast majority of investors, this is not even an option right now. The second is that it is a debt-oriented investment option which invests only 10-25 per cent of your money in equity and the remaining in fixed-income.

Broadly, I would say that this could be a suitable investment option for conservative investors who are central-government employees. Also, among fixed-income alternatives, this has the least lock-in period. If you look at other tax-saving fixed-income alternatives like the NSC, PPF or bank FDs, all of them come with a much higher lock-in period.

This article was originally published on February 15, 2021.