Public Provident Fund (PPF) and National Pension Scheme (NPS) are mainly known as retirement-oriented savings tools and yields. PPF is a better option for retirement, but NPS helps to yields around 10 per cent post tax-return. Both of the tools are eligible for tax deduction under Section 80C of the Income Tax (I-T) Act. In PPF maximum investment allowed is Rs 1.50 lakh per annum under Section 80C, whereas, an investor can invest in NPS under Section 80CCD (1B) up to a maximum of Rs 50,000 per annum. If we compare both, the later one is better as it maximises the return post-retirement or after 60 years of age.
"NPS is a product where one invests until 60 years of age with the option to invest until the age of 70 years. Post-retirement, the rule says that one can withdraw approximately 60 per cent of the corpus as lumpsum without any tax impact and the remaining 40 per cent will be in the form of an Annuity and will be taxable, just like any other income," Milin Shah, Head-Product Development & Planning at HappynessFactory said to Zeebiz.com
He further added, "An investor can invest up to 75 per cent in Equity funds and this is a great advantage of NPS. While equity investments can be volatile, over the long horizons of a typical NPS investment, they are likely to generate higher returns than fixed income securities (Like PPF)."
Talking about the ideal investment strategy in regard to PPF and NPS, Shah said that investors should choose an option depending upon their life situation and risk appetite. Investors can also look at investing in Equity Linked Saving Scheme (ELSS) offered by Mutual Funds. ELSS are eligible for tax saving up to an investment of Rs 1.50 lakh just like PPF.
Speaking on the features of the PPF and NPS, Kartik Jhaveri of Transcent Consultants said to Zeebiz.com that PPF account matures after completion of 15 years which can be extended/blocked of another five years with or without making additional contributions. The PPF is a 100 per cent tax-free, which is completely a Debt-oriented product, guaranteed by the government, providing safety of capital. The current interest rate on PPF is 8 per cent.