NPS Vs PPF: Check which plan give you better returns

NPS vs PPF

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.

Difference Between NPS and PPF

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

Public Provident Fund (PPF)

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.

Eligibility Conditions and Other Restrictions

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

National Pension Scheme (NPS)

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.

Eligibility Conditions and Other Restrictions

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 the End!

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.