NPS & PPF

Start early to avoid missing out on your retirement dreams

Understanding the NPS & PPF

Saving for the future is a crucial aspect of financial planning, and two popular investment avenues in India are the National Pension System (NPS) and the Public Provident Fund (PPF). While both cater to long-term savings, they have distinct features and serve different purposes. In this article, we will explore the key differences between NPS and PPF to help investors make informed decisions

National Pension System (NPS)

Purpose and Structure:

NPS is a voluntary, long-term retirement savings scheme designed to provide a steady income after retirement.
It operates on a contributory basis, with individuals contributing to their NPS accounts during their working years.

Flexibility and Portability:

NPS offers flexibility in choosing investment options and fund managers, allowing investors to decide the asset allocation based on risk appetite.
It is portable, meaning individuals can transfer their NPS accounts across employers and locations.

Public Provident Fund (PPF)

Purpose and Structure:

PPF is a long-term savings scheme with a tenure of 15 years, extendable in blocks of 5 years.
It is designed to encourage small savings among individuals and is backed by the government.

Interest Rate and Returns:

The interest rate on PPF is set by the government and is usually higher than other fixed-income instruments.
Interest is compounded annually, and the returns are tax-free.

Tax Benefits:

PPF contributions qualify for tax benefits under Section 80C of the Income Tax Act.
The interest earned and the maturity amount are tax-free, making it an attractive tax-saving option.

Withdrawal Options:

PPF has a lock-in period of 15 years, but partial withdrawals are allowed from the 7th year onwards.
After maturity, individuals can either withdraw the entire amount or extend the account in blocks of 5 years.

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