NPS vs PPF: In today’s time, it is very important not only to earn but also to save properly for the future. To ensure regular income after retirement, people invest money in long-term plans. In India, National Pension System (NPS) and Public Provident Fund (PPF) are two such schemes which are used to prepare for retirement. The objective of both is the same, but the method and risk are different.
What is NPS?
National Pension System i.e. NPS is a retirement savings scheme launched by the Government of India. It is controlled by an organization named PFRDA. The money deposited in this scheme is invested in places like stock market and bonds.
Both employed and self-employed people can invest in NPS. It has two accounts
Tier-1 Account: This is the main retirement account, from which money cannot be withdrawn easily.
Tier-2 Account: This is optional and money can be withdrawn as and when required.
At the time of retirement, it is necessary to use a part of the deposited amount for taking pension, so that some income can be received every month.
Special features of NPS
Possibility of higher returns- Since NPS money is linked to the market, there is a possibility of higher growth in it in the long run. However returns are not fixed.
Facility to choose investment- In NPS you can decide how much of your money to invest in shares, government bonds or other instruments. If you wish, the system itself changes the investment according to your age. Tax relief- Tax exemption is available on the amount deposited in NPS. Income tax can be reduced by investing up to a certain limit.
Low expenses- Fund management expenses are very low in this scheme, which increases profits in the long run.
Pension after retirement – After retirement, pension is received from a part of the deposited amount, due to which regular income is maintained.
Limited withdrawal facility – Partial withdrawal is allowed for certain special needs like education, treatment or buying a house.
what is ppf
Public Provident Fund i.e. PPF is a government savings scheme, which is considered very safe. The interest received in this is fixed and is not affected by market fluctuations.
PPF account can be opened in bank or post office. In this, a minimum of ₹ 500 and a maximum of ₹ 1.5 lakh can be deposited every year. Its duration is 15 years, which can also be extended further.
Special features of PPF
Completely safe – PPF is supported by the government, so there is no risk of losing money in it.
Long Term Savings – With a tenure of 15 years, it creates a habit of regular and disciplined savings.
Tax-free benefit- The amount deposited in PPF, the interest received on it and the money received on maturity are not taxed.
Ease of depositing – You can deposit money once a year or in installments, making it easy for people with different incomes.
Loan facility – After a few years, a loan can also be taken against the PPF account, which is cheaper than a normal loan.
Partial Withdrawal- After completion of 7 years, some money can be withdrawn if needed.
Difference between NPS and PPF
Security
NPS: There is risk due to being linked to the market
PPF: completely safe
Return
NPS: Can get higher returns, but not fixed
PPF: Returns low but stable
facility to withdraw money
NPS: Limited withdrawal before retirement
PPF: Both withdrawal and loan after stipulated time
tax
NPS: Tax exemption on investment, but tax on pension
PPF: Completely tax-free
Which plan is right for you
If you are willing to take risk and want to make more money in the long run, then NPS may be right for you. If you want security and fixed returns and want to save without risk, then PPF is a better option.
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