National Pension System and Public Provident Fund (PPF) both have their specific benefits when it comes to the post-retirement scenario. Both of these are long-term investment plans. With the underlying similarities between these two pension plans, there are distinct differences as well. An understanding of the same can help in making the final decision and determining which of the two seems ideal in your specific situation. Here are some points of comparison between NPS and PPF.
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†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
| Criteria | PPF | NPS |
| Eligibility for the Schemes | Provident fund is a long-term retirement plan, which is for any Indian resident, except the NRIs | The National Pension System does not have any such demarcations. It is open for every Indian including the NRIs. Anyone who belongs to the age group of 18-60 is eligible for NPS |
| Minimum and Maximum Investment Amounts | Minimum amount: Rs. 500 Maximum amount: Rs. 1,50,000 Only 12 contributions can be made in a year. |
Minimum amount: Rs. 6,000 Maximum amount: No limit as long as the amount does not exceed: 10% of the investors’ salary 10% of the investors’ gross total income |
| Return of Investment | PPF is all about fixed returns and there is no scope for added frills | NPS is the higher return vehicle for a portion of what you invest goes towards equity trading which signifies higher returns |
| Maturity Period | 15 years which can be extended further for 5 years | Maturity tenure is not fixed. Contribution to be made till the age of 60 which can be extended to the age of 70 |
| Tax Benefits | All deposits are deductible under Section 80C of the Income Tax Act, 1961. Tax can be exempted at the time of withdrawal. | Tax benefit of Rs. 1,50,000 can be availed under Section 80CCD(1) of the Income Tax Act, 1961. |
| Premature Withdrawals | Can be made after the 7th year of the purchase | Can be made after the 10th year only under special circumstances |
One of the most popular investment schemes, the Public Provident Fund (PPF) is famous for its flexible nature. A famous savings plus investment plan, PPF was launched to promote small investments by providing reasonable returns.
Currently, the interest rate of PPF is 7.1% and it offers a tax exemption of up to Rs. 1.5 lakhs per annum.
Public Provident Fund account can be opened by any Indian resident above the age of 18
The account can be opened on behalf of minor as well
PPF account can be operational online as well
The current rate of interest is 7.1%
Premature withdrawals can be made but with some regulations
Aadhar card needs to be linked with the bank account to open a PPF account
It comes with a lock-in period of 15 years
Partial withdrawals can be made starting from the 7th yearA
Launched by the Government of India keeping in mind the senior citizens of the country, the National Pension Scheme (NPS) is completely administered and regulated by the PFRDA (Pension Fund Regulatory and Development Authority).
Available to all Indians including NRIs (Non-Resident Indians) between the age of 18 to 60, NPS also offers a tax exemption of Rs. 1,50,000 under Section 80CCD of the Income Tax Act, 1961.
The age of the scheme holder should range between 18 to 60 years
Any Indian resident, as well as NRIs, can avail of the benefits of the scheme
A unique PRAN (Permanent Retirement Account Number) is required for investment under Tier-I and Tier-II accounts
NPS offers flexibility in asset allocation choices (Auto choice and Active choice) to the holders
A ceiling of Rs. 1.5 lakh can be exempted from taxation under this scheme
Contributions made towards the scheme are also flexible
The scheme holder should be KYC compliant
NPS account is mandatory to carry on the transactions
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In any retirement portfolio, whether it is National Pension System or Public Provident Fund, both have their place and associated benefits. PPF is all about the safety cushion regarding your investments with solid returns. On the other hand, there is a dual benefit associated with NPS, which includes both capital safety and appreciation of investments. No wonder there is a higher interest regarding the National Pension System especially because of the recommended amendments in the system, which the government is going to implement in the coming times.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance
plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
+Returns Since Inception of LIC Growth Fund
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
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