New Delhi: Nowadays, more and more people are looking to invest their money rather than just keep it in their bank. With the demand for investment rising, there is a rise in the options of investing our money out of them, the two schemes, PPF and NPS stand out and are extremely sought after among the investors.
One can find a lot of retirement schemes and pension plans available to invest in, but among them, the PPF and NPS are some of the most popular schemes. While the full form of PPF is Public Provident Fund, the full form of NPS is National Pension Scheme. It must be noted that both the schemes are backed by the Government of India. In this article, we will take a look at these two schemes.
What is PPF?
The PPF or the Public Provident Fund is a scheme funded by the government that gives guaranteed returns on investment through compound interest. The maturity period of PPF is 15 years and it is mainly offered by those who are looking to build a retirement corpus over a long investment horizon. The PPF is ideal for those who are looking to invest over a period of time without any risk and want to get steady returns.
PPF interest rate 2024-2025
At present, the rate of interest of PPF is 7.1 per cent compound yearly and is considered an ideal choice for those looking for a risk-free investment. It must also be noted that for deposits in a PPF account up to Rs 1.5 lakh a year, there is tax exemption under section 80C of the Income Tax Act, 1961.
Who can invest in PPF?
A citizen of India who lives in the country and is 18 years or older can open a PPF account and invest in it. Those who are Non-Resident Indians or belong to Hindu Undivided Families (HUFs) cannot invest in the scheme. One can open one PPF account and there are no provisions for a joint account. However, one can open an extra PPF account on behalf of someone who is a minor or a person of unsound mind.
What are the benefits of PPF?
- The PPF is safe for those looking to invest for the long term without taking any risk and are also looking to get tax exemptions.
- The minimum investment amount in a PPF is Rs 500 and the maximum annual investment in it is Rs 1.5 lakh.
- For deposits up to Rs 1.5 lakh a year, there is a tax exemption under section 80C of the Income Tax Act, 1961.
What is National Pension System?
The NPS or National Pension System is sponsored by the government and is linked to the market. It is a pension scheme enabling people to earn high returns from their investments over the long term. This program is open to employees from the public, private and unorganized sectors except for those in the armed forces. It enables the account holders to invest regularly in a pension account through their employment tenure. After retirement, the account holders can use a portion of the corpus as a lump sum and use the rest as a pension.
Who can invest in NPS?
Any Indian citizen who is older than 18 years and younger than 70 years can open the NPS account. Those who are working and belong to this age bracket can join the scheme and make regular investments in it. At the time of opening the account, one has to furnish relevant documents for the Know Your Customer (KYC) requirements.
What are the benefits of NPS?
- In NPS, the return is high but since it is linked to the market, the risk is also higher than PPF.
- The minimum annual investment in NPS is Rs 6000 and there is no upper limit of investment.
- The returns in the NPS can oscillate between 12 per cent and 14 per cent but with market risk and a long investment horizon.
- Tax will be deduced up to Rs 2 lakh a year. However, 40 per cent of NPS is free of tax and hence considered a low exemption.
