NPS vs PPF: Selecting the appropriate investment choice has continually been a difficult endeavor for an average person. Particularly regarding NPS Vatsalya Yojana and Public Provident Fund (PPF), investors frequently feel bewildered. Both schemes offer a chance to invest over an extended duration and also guarantee secure returns. However, the question comes up as to which plan will provide greater advantages? Let’s grasp this concept in a straightforward and thorough way.
NPS Vatsalya Yojana is a scheme under the National Pension System that allows you to build a substantial fund over time by contributing a small sum annually. Imagine investing Rs 10,000 every year for 18 years; you would have contributed a total of Rs 5 lakh.
This plan is anticipated to provide an average annual return of 10%. If this fund remains untouched until the age of 60, it could grow to as much as Rs 2.75 crore. The Public Provident Fund (PPF) is a government program that can be initiated at a post office or bank. Investing in it is entirely secure, as it is backed by the government. Assuming you invest Rs 1.5 lakh annually, after 25 years this total will approximately reach Rs 1.03 crore.
At present, PPF provides an annual interest rate of 7.1%. This interest is credited to your account annually, and because of compounding, it slowly builds a substantial fund. The money invested in PPF is entirely tax-exempt, making it a secure and reliable investment choice for you.
What are the key distinctions between NPS and PPF?
Interest Rates
NPS provides an average yield of 10%, surpassing that of PPF.
PPF now provides a stable and secure interest rate of 7.1%.
Liquidity (Withdrawal Option):
NPS enforces stringent withdrawal regulations. Withdrawing a significant sum before reaching the age of 60 is challenging.
PPF features a lock-in duration of 15 years, however, partial withdrawals can be made after 7 years.
Market Risk Factor
The returns from NPS are influenced by the market, which implies a certain level of risk.
PPF is entirely devoid of risk since it is a scheme backed by the government.
Fiscal Advantages
Tax benefits can be availed in NPS through sections 80C and 80CCD.
PPF provides tax benefits under section 80C, with both its interest and maturity amount being entirely tax-exempt.