Published 28th June 2024
Debt mutual funds and FDs (fixed deposits) are among the most preferred avenues for short-term investing. But, there’s one more option you may not be aware of – NPS (National Pension Scheme) Tier II.
NPS Tier II gives you the flexibility to allocate 100% of your money to debt securities (if you pick the ‘Active’ choice).
Let’s compare them on four parameters in the following slides.
You can invest in a debt fund directly through an AMC’s website or through intermediaries. But to invest in NPS Tier II, you first need an active NPS Tier I account.
Both NPS Tier II and debt funds are highly liquid in nature since they don’t come with a lock-in period.
The tax treatment is the same as during withdrawals, the tax implications will be the same based on which income tax slab you fall under.
NPS Tier II plans (Scheme C and Scheme G) deliver higher returns than debt funds. Does that mean you should invest in NPS Tier II? Click the link below to get your answer.
Note: Only funds with a five-year history are considered for calculating category median returns.