PPF (Public Provident Fund) Vs NSC (National Savings Certificate): Which is better?

Among the plethora of investment instruments offered under the post office savings schemes, PPF (Public Provident Fund) and NSC (National Savings Certificate) occupy the top positions in terms of assuring high returns. If you wish to choose between these two kinds of savings account, you must make a detailed comparison of the different aspects of these schemes to be able to take the right decision.

Minimum and maximum contribution

A minimum of Rs. 500 per year must be deposited in the PPF account per year with an upper maximum limit of Rs. 1,50,000. The NSC account permits a minimum deposit of Rs. 100 without a maximum limit whatsoever. The NSC certificate is issued in multiples of Rs. 100, Rs.500, Rs.1,000, Rs. 5,000 and Rs. 10,000. Hence if you want to invest Rs. 40,000 for instance, you will have to purchase 4 certificates of Rs. 10,000 value.

Returns on investment

The interest rates are very attractive for both PPF and NSC investments. The interest rates vary from year to year depending on the financial health of the Indian economy. However, at present, the interest rates are 8.1% and 8.0% per year for PPF and NSC respectively.

Tax benefits

Investments in both these savings schemes are eligible for tax exemptions under Section 80C. Investments done in these schemes are exempted from taxation for a maximum value of Rs. 1,50,000 per year. In case of PPF scheme, the principal amount deposited as well as the interest accumulated are tax exempted. In case of NSC, only the invested amount is tax exempted and not the interest amount.

Tenure of deposit

The maturity period of a PPF account is 15 years. It is possible to extend it for a period of 5 more years. For instance, if you open the PPF account when you are 20 years of age, it matures when you are at your 35 years. If you choose to extend it beyond without closing it down on maturity, you can do so for another block of 5 years and withdraw the sum accumulated at the end of 20 years in total. In case of a NSC account, the maturity period is only 5 years and it will have to be closed down at this point by withdrawing whatever amount has been accumulated.

The number of accounts permitted

When you open a NSC account, you can’t keep adding up money to it any more. You will have to buy another NSC separately every time you wish to make an investment. In case of PPF, it is possible to have one single account and keep adding money to it. When you choose to open two PPF accounts with your earnings one for yourself and the other for a minor child in the family, you can do so. However, only up to a total limit of Rs. 70,000 per annum ( in both the accounts you open) will qualify for tax exemption and the amount you deposit in the account(s) will invite tax.

Which one to choose?

Which type of account is better for you – PPF or NSC depends on your situation and you must work with your expectations and priorities to choose the right one for your investment needs. Since the interest rates are almost similar in both these accounts, you will have to compare the other aspects for your convenience to make the decision.
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