NPS Tier 2 vs Mutual Fund Calculator
Same growth, very different tax on the way out
NPS Tier 2 vs Mutual Fund Calculator
₹
yrs
%
%
NPS Tier 2 corpus (pre-tax)
0
no lock-in, no 80C benefit
Equity MF corpus (pre-tax)
0
same return assumption
Post-tax corpus difference
0
In today's money (inflation-adjusted)
0
real purchasing power after assumed inflation
The tax treatment gap
NPS Tier 2 has no dedicated capital-gains concession for non-government subscribers — withdrawals are typically added to your income and taxed at slab, unlike equity mutual funds which get 12.5% LTCG treatment above a Rs 1.25 lakh annual exemption after 12 months.
Why Tier 2 still gets used
Tier 2 has no lock-in (unlike Tier 1's mandatory retention until 60) and rock-bottom fund management costs — it functions like a very cheap, flexible investment account despite the tax disadvantage versus equity funds.
Government employees get a 80C carve-out
Central government employees investing in NPS Tier 2 with a 3-year lock-in DO get Section 80C deduction — a materially different case not modeled here, since this compares the general (non-government) tax treatment.
Assumes both NPS Tier 2 and the equity mutual fund invest similarly (equity-heavy) and earn the same gross return — the entire comparison is about tax treatment on withdrawal, not return differential. NPS Tier 2 withdrawal is modeled at your income tax slab rate (the general non-government-employee treatment); equity MF at 12.5% LTCG above a Rs 1.25 lakh annual exemption, assuming a holding period beyond 12 months. Real NPS Tier 2 taxation has some ambiguity/evolving guidance — verify current treatment with a CA before large allocations. Not tax advice.