Both National Pension Scheme (NPS) and Public Provident Fund (PPF) are saving schemes. NPS is a market linked scheme, so its returns are based on market conditions. On the other hand, PPF gives fixed returns, set by government every quarter. PPF is not just a pension or retirement saving scheme, it can be used for other purpose. Unlike PPF, NPS is specifically a retirement saving scheme.
This article breaks down both options in simple terms, helping you pick the best investment for your future.
What is NPS?
The National Pension Scheme is a government-backed retirement program available to employees across public, private, and unorganised sectors (excluding the armed forces).
Under this scheme, individuals can consistently invest in a pension account throughout their employment. Upon retirement, a portion of the accumulated funds can be withdrawn as a lump sum, while the remaining amount is used to receive a regular pension.
Here are some key features of NPS:
- Market-linked investment scheme
- Tier-I account with mandatory contributions
- Tier-II account with voluntary contributions
- Partial withdrawal allowed after 60 years
- Tax benefits on contributions and maturity amount
Who can invest in NPS?
Any Indian citizen between 18 and 70 years old can open a National Pension System (NPS) account. To do so, they need to follow KYC norms and should not be an insolvent or of unsound mind.
What is PPF?
Established in India in 1968, the Public Provident Fund (PPF) serves the purpose of gathering modest contributions for investment and returns. It can be seen as an investment tool that allows individuals to build up retirement funds while simultaneously minimising annual taxes. If someone is seeking a secure investment avenue to save on taxes and secure assured returns, opening a PPF account is a wise choice.
Introduced in India in 1968, the Public Provident Fund (PPF) aims to collect small contributions for investment and returns. It serves as an investment tool, enabling individuals to accumulate funds for retirement while minimising annual taxes.
Here are some key features of PPF:
- Minimum investment: Rs. 500 per year
- Maximum investment: Rs. 1.5 lakh per year
- Investment period: 15 years
- Interest rate: 7.1% per annum (compounded annually)
Who can invest in PPF?
Any India citizen can open a PPF account. A person can have only one PPF account, except if the second one is for a minor. Non-Resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not eligible to open PPF account.
While NPS and PPF are excellent for long-term goals, fixed deposits offer the flexibility to align with a wide range of financial needs. FD come with tenures ranging from a few days to several years. This allows you to tailor your investments to specific goals. Whether you are saving for your child's education, a dream vacation, or any other goal, an FD can be a smart way to grow your money with guaranteed returns.