NPS vs PPF, Which is better? Know Here

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Public Provident Fund (PPF) is a government backed investment option in which the investor can invest some amount annually and get assured returns based on the PPF Interest Rate. Whereas NPS provides returns which are not fixed.

National Pension Scheme (NPS) is a pension scheme launched by the Government of India in which people can invest in order to secure their retirement. This scheme is market linked, thus does not offer any fixed returns. To know NPS vs PPF, which is better? Check the article below.

Difference between NPS and PPF

People should invest their hard earned money at a place where they expect good returns can check the differences between PPF and NPS (based on different factors) below:

FactorsNPSPPF Account Details
SafetyNot Safe – Linked to marketSafe – Not linked to market
Eligibility18 years to 65 yearsNo age limit
Time PeriodTill 60 years of age15 years
Minimum Investment (per year)₹1000₹500
Maximum Investment (Per year)No Limit₹1,50,000
Interest Rate11% – 14%7.1%
NPS vs PPF at a Glance

NPS vs PPF – Safety

There is a big difference between PPF and NPS in terms of safety. Public Provident Fund is completely backed by the government of India and is not linked to the stock market in any case.

However, the National Pension Scheme is market linked, thus, the returns in NPS are subject to the ups and downs in the stock market. Though the linkage to market, also gives the opportunity to the investors to have better return as compared to PPF.

But, for those who want safety of their money and want guaranteed return should go for PPF as it is completely safe.

NPS vs PPF – Eligibility Criteria

All the Indian citizens are allowed to have at most one PPF account unless the other account is in the name of a minor. NRIs and HUFs cannot open their PPF account.

In NPS, any Indian citizen can invest including NRIs.

The age criteria for NPS account holders is 18 years to 65 years, where there is no such age restriction in case of PPF. Even a minor can invest in PPF under the name of his/her guardian.

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NPS vs PPF – Investment

The minimum investment which can be made in PPF is Rs 500 per year which can go upto a maximum of Rs 1.5 lakh. Whereas, in NPS, the minimum investment is Rs 1000 annually which does not have any upper limit for salaried employees, but in case of self-employed, the maximum limit is 20% of his/her total annual income.

The time period of investment in PPF is 15 years which can be extended further in the block of 5 years. But in NPS, the investor makes the investment till he/she reaches the age of 60 years. However, this limit can also be extended upto 70 years

NPS vs PPF – Interest Rate

NPS being market linked, does not offer any fixed return on investment, but the Interest rate of PPF is fixed and is declared by the Finance Ministry of India every financial year.

Current HDFC PPF interest rate is 7.1%. Generally, it rages between 7-8%.

The interest rate or returns in NPS is not fixed. Check the performance of different NPS equity funds in the table given below:

NPS Funds3 year returns5 year returns
SBI Pension Funds Pvt. Ltd.12.93%11.03%
ICICI Prudential Pension Fund Management Co. Ltd.13.46%11.32%
HDFC Pension Management Co. Ltd.14.11%11.92%
Kotak Mahindra Pension Fund Ltd.13.56%11.33%
LIC Pension Fund Ltd.13.30%10.79%
UTI Retirement Solutions Ltd.12.81%11.04%
NPS Returns History 2021

NPS vs PPF – Tax Benefits

In case of PPF, the investor can invest upto 1.5 lakh rupees in PPF which will be exempted from income tax under the section of 80C. And upon maturity, the investor can withdraw whole of his money without paying any tax on it.

However, in the case of NPS, the investor can save tax benefit on upto 1.5 lakh rupees under Section 80C, only if it is less than 10% of his/her income.

After maturity, investors can withdraw 40% of the amount without paying any tax on it. The rest 40% should be withdrawn by buying annuities on which tax will have to be paid by the investor. After paying the tax for it, investors can withdraw the remaining 20% or buy annuities with them.

NPS vs PPF – Partial Withdrawal

In PPF, Partial Withdrawal is allowed after the 7th year of opening of PPF account. However, partial withdrawal is only possible under certain circumstances like Child Education, Health Emergency etc.

In NPS, the investor can take partial withdrawal after the tenth year of investment starting. But if, the investor wants to break his/her NPS scheme before his/her retirement, then he/she will have to buy annuities with 80% of the amount received until then.

NPS vs PPF Which is Better

In terms of risk and fixed returns, PPF is better option for the people who does not bear risk with their money. Whereas NPS is better for the people expected high returns in long term can bear risk of ups and downs in the market.

Also Read | PPF Account in Post Office

  1. In NPS, what if 1.5 lakh is more than 10% of our salary?

    In case of NPS, if the investor is investing 1.5 lakh rupees annually but it is more than 10% of his total income, then he/she can get the tax benefit on only upto 10% of his/her annual income.

  2. What are annuities?

    Annuity is a plan in which, the investor can invest some amount in lump sum and he/she will get its regular payment for the rest of his/her life. It’s a kind of pension.

  3. Is it possible to invest in both NPS and PPF?

    Yes, they can invest their money in both NPS and PPF. The amount of money on which they are ready to risk, they can invest in NPS and the rest which they want to secure for their future, can be invested in PPF.

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