homepersonal finance NewsPPF vs NPS: Find out which scheme suits you better

PPF vs NPS: Find out which scheme suits you better

PPF vs NPS: Find out which scheme suits you better
Profile image

By Anshul  Feb 28, 2020 6:25:11 AM IST (Updated)

While PPF was introduced by the National Savings Organization in 1968, NPS was originally launched for the government employees in 2004 and extended to the general public in 2009.

Public provident fund (PPF) and National pension system (NPS) are the investment avenues that come with specific benefits. Both of these are long-term deposit plans. While PPF was introduced by the National Savings Institute in 1968, NPS was originally launched for the government employees in 2004 and extended to the general public in 2009.

Recommended Articles

View All

Here is a comparison between PPF and NPS:
What is PPF?
PPF is majorly a retirement-focused investment instrument that comes with EEE (Exempt-Exempt-Exempt) tax status. The maturity amount and the overall interest earned during the period of investment are tax-free. NRIs can't open this account.
It has a lock-in period of 15 years. However, the same can be extended within one year of maturity for a period of five years and so on. In this case, partial withdrawals are allowed after the seventh year with some limitation.
According to Suren Kochhar, senior president, head of sales and marketing, YES Asset Management (India), periodic investment in PPF for a long-term can do the trick with the power of compounding. Longer the money stays invested, the quicker it grows, they say.
The interest rate on PPF is reviewed every quarter by the government.
What is NPS?
NPS is not only a retirement plan. It gives subscribers the option to set preferred allocation to different asset classes such as government bonds, equity market instruments and corporate debt. It can be opened by NRIs also, unlike PPF.
It offers 2 kinds of account -- Tier 1 and Tier 2. While the Tier 1 NPS account is strictly a pension account which doesn't allow withdrawals, the Tier 2 account -- known as investment account -- is a voluntary saving account account. Tax benefits are applicable for investments in the Tier I account only. There is no tax benefit on investment towards the Tier II NPS account.
"The maturity tenure is not fixed. An investor can contribute to the NPS account until the age of 60 years with an option to extend the investment to the age of 70 years," according to BankBazaar. After 10 years, accountholders become eligible for early or partial withdrawal under specific circumstances.
What experts say on selection of these schemes?
According to the experts, the selection majorly depends on individuals' preferences like risk appetite, age factor and capital available.
"While selecting, what a major component investor should keep in mind that there is risk involved. For example, younger contributor with high-risk appetite must consider NPS as return is subject to market conditions. The Investors receive returns in range of 10-12 percent," said Ritesh Asher, chief strategy officer, Kifs Trade Capital.
"Investors close to retirement must opt for safer bet such as public provident fund scheme as it offers fix returns and will be compounded yearly. Investor also enjoys tax benefit," he said.
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!

Top Budget Opinions

    Most Read

    Market Movers

    View All
    Top GainersTop Losers
    CurrencyCommodities
    CompanyPriceChng%Chng