NPS vs PPF | Which is better and more profitable for retirement planning

 If you have to choose between NPS (National Pension Scheme) and PPF (Public Provident Fund) and invest in it, what will you do? Will you invest in NPS or PPF? To do this, it is important to know about NPS vs PPF closely. Let us see which one will be beneficial for you to invest in NPS and PPF.

In this article we will do compression About NPS vs PPF. Which one is better to get good return

To do this, it is important to know about NPS and PPF closely. Let us see which one is beneficial for you to invest in NPS and PPF. NPS vs PPF

What is NPS and PPF? NPS vs PPF

NPS-The National pension scheme (NPS) is a pension scheme that was launched in January 2004 for government employees under section 80CCE, customers can receive an additional deduction of up to Rs 50,000. Retirement planning is very important for you to have income after retirement. 

PPF-PPF or public provident fund is one of the most popular saving schemes in India. This scheme is offered by the central government. The money and return invested in this scheme are safe.

Which is better? NPS vs PPF

Both PPF and NPS are government backed schemes, hence both are reliable and popular. But, there are many differences in their account opening, deposit amount return, risk, tax exemption, withdrawal etc. We will discuss the difference on the following key points

  • Difference between control over deposits and investments.
  • Difference between account opening and perks
  • Difference in rate of return ( interest/dividend)
  • Difference between loan and partial withdrawal
  • Difference between tax on deposits and withdrawals
  • Difference in investment security or risk

The difference in Deposit and Investment

It is mandatory for you to deposit at least Rs 500 every year in PPF. You can deposit a maximum of 1.5 lakh rupees every year. 

The account can be opened by depositing at least Rs 500 in NPS. After that, it is mandatory to deposit at least 1000 rupees every year.

The deposit of PPF goes to the account of the Government of India. The government invests this money in various government and corporate bonds. 

The government gets interested in them, and accordingly, the government decides the interest of PPF. 

The money deposited in NPS is invested in the market. For this, you can choose your Pension Fund Manager.

Note: Fund managers invest your money in three options – equity funds, government bonds, and fixed income instruments. However, more than 75 percent of the stock cannot be invested in the market.

NPS vs PPF: Difference in return 

Since the government itself uses PPF money. She invests its deposits in Government and Corporate Bonds. The interest rate of PPF is decided on the basis of their returns. In the past years, the interest rate of PPF has been around 8 to 9%.

NPS returns are not fixed. If you choose a fund consisting of corporate bonds and government bonds, the returns will be more or less similar to that of PPF. But if you invest more money in equity mutual funds, your average return can be 12-14 percent. However, in a few years, you may also see losses.

NPS vs PPF: Difference in partial and loan withdrawal

From the third to the sixth year of opening the PPF account, you get the facility to take a loan from it. Whenever you apply, you can take up to 25% of the balance that would have been there at the end of the first 2 financial years as a loan. There is no provision for taking a loan in an NPS account.

After the completion of 5 years of the PPF account, you are allowed to withdraw some part of the PPF on special needs. 

After 3 years of opening an NPS account, you can withdraw 25 percent of your contribution for certain types of needs. Such as for higher education, marriage, treatment of serious illness, buying or building a house, etc. 

After 10 years, you can also withdraw the entire amount of NPS on such needs.

According to me, which is better and more profitable in NPS vs PPF?

According to me, if an investor just wants to raise capital, then PPF is better for him.

Because the entire amount received from investment in PPF is exempt from tax.

First, he can invest in PPF for 15 years according to his goal.

Post Office can invest the return received from it in MIS.

The amount received every month in MIS can be invested in NPS.

This way a smart investor can make the very best investment for himself.

But if you want to invest for the long term and can take a little more risk.

So you invest in the stock market or mutual funds only because of these, you get the highest returns in the long run.

I hope you guys have been able to solve the problem of NPS vs PPF.

Table NPS vs PPF

EligibilityAnyone in the age group of 18-65 – Indian Citizen or NRIAny Indian Citizen / HUF not eligible
minimum investment₹500₹500
maximum investmentno limit₹ 1,50,000
lock-in-periodup to the age of 60up to the age of 15
dependency of returnsdependent on market performanceGuaranteed Returns Determined on Quarterly Basis
Expected Returns8-10%7.1% (as of Dec 2020)
Can you determine where your money will go?yes (Equity, Debt, Govt Bonds, AI)no
tax benefitsExempt, Exempt, Exempt (Annuity are taxable)Exempt, Exempt, Exempt
Extension of investment10-year extension just 1 timeCan be extended any number of times in a block of 5 years
loan facilityNot availableAvailable between 3rd to 6th year
pension facilityAvailable after 60 years of ageNot available
Expenses Ratio0.01%0
Risk Low RiskNo-Risk
Employer Contributionit can be no
Can it be attached by the court in the form of Debt?yesno

Table credit: https://punjiguide.com/


The main objective of investing money in a savings scheme is to earn more profit. Since NPS has the upper hand in terms of returns, then the choice of NPS will be better. But, keep two things in mind- Have a basic understanding of the stock market, so that you can choose the best Pension Fund Manager to invest your money.

 You can also change your fund manager if you understand the need. Investment should be done for a long time (10 to 15 years), so that your investment is least affected by the fluctuations of the stock market.

If you do not have much understanding of the market. And expect assured returns, at an estimated time in advance. Then blindly invest money in PPF.

so friends! This was the comparative information about PPF and NPS. You can take help of our articles for other useful information related to investment and tax







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