Which Investment Plan is better: PPF or NPS?

Looking for some retirement plans? Confused between two major retirement plans available PPF and NPS. Don't know which one is better? In this article,we will help you decide by comparing the two investment options.

What is NPS?

NPS (national pension scheme) is a voluntary retirement saving plan scheme which is designed to make their subscribers contribute for their future during the working life. It aims to encourage a habit of saving for after retirement life at present.
In the NPS scheme, the savings are saved in a pension fund invested by PFRDA. This fund increases and at the time of retirement, the amount can be used to purchase a life annuity or withdraw a part and invest the balance into an annual annuity plan.

What is PPF?

PPF is a long term retirement saving scheme started by the government of India which provides a better life after retirement. The deposit made in this account is minimum 500 and maximum 1.5 lakh.It is a tax saving tool under section 80C of Income Tax Act and its tenure is 15 years.

Key differences between NPS and PPF account-

• PPF is much safer and risk free as it is a fixed return scheme set by the government while NPS is not a fixed return instrument as returns are linked to the market.
• In NPS minimum contribution of 6000 or 250 is required, 60% can be withdrawn after the retirement and 40% is used to purchase an annual annuity whereas in PPF there is no boundations regarding the maturity amount and the lock in period is 15 years.
• PPF is a good tax- saving investment as there is no tax on interest and maturity amount. It offers a deduction under section 80C of income tax Act but In case of NPS under section 80CCD there is total benefit upto rupees 2 lakh.
• One more difference is that NRIs can invest in the NPS scheme but not in the case of PPF.
• In PPF contribution made to this account is minimum 500 and maximum 1.5 lakh whereas in NPS the total contribution made can be 10% for salaried and 20% for the self-employed.

The key differences between the two Investment options might give you a clarity for choosing a better option for your post- retirement life.