WHAT IS IT?

THE TAX BITE NPS Tier II has lower costs, but is tax unfriendly. Here’s a comparison with index funds and fixed deposits, which are similar products NPS Tier II Index funds Fixed deposit

Return Market-linked Market-linked Guaranteed interest

Cost Very low Low No cost

Number of withdrawals No limits No limits No limits

Exit Load Nil Varies between nil and 4%

Penalty on withdrawals

Tax treatment No section 80C and withdrawals are taxable

Section 80C benefit for equity-linked savings

scheme. Withdrawals after one year are tax-free

Section 80C benefit for a five-year fixed deposit.

Withdrawals are taxable

NEW PENSION SYSTEM (NPS)Here’s a quick guide to the new NPS savings account.

Who can invest?

When can you take your money

out?

What is the least

that I need to invest?

What is the

maximum I can invest?

How many times do I need to

invest?

What should be the min. account

balance?

How much do I

lose if I don’t keep min. balance?

Only a pension account

(Tier I) holder can open a

Tier II account

Anytime, even a day after you

invest

Rs1,000 to open an

account and then Rs250

per contribution

No limit At least four times in a

year

Rs2,000 or zero, if you

move funds to the Tier I account

Rs 100

WHAT IS MY COST? to the central

record-keeping agency every transaction

Rs10

to the point of presence as transac-

tion fee

Rs20

of fund value every year to the custodian

0.0075%

of fund value every year for fund manage-

ment

0.0009%

to activate the account

Rs20

Source: Mint research