NPS vs. PPF: What is the right choice for retirement planning

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    Savings are essential for employees so there is plenty of money for post-retirement expenses. Two popular schemes, the NPS (National Pension System) and the PPF (Public Futures Fund) assist with retirement planning.

    NPS vs PPF: It is important that people at work plan their retirement on time. The best way to do this is to start early and invest regularly for the long term. Long-term investment options in India include PPF (Public Futures Fund) and NPS (National Pension System) and are popular. Let’s look at the details of these two products …

    Who can invest

    NPS is a pension scheme for government and private sector employees. Non-resident Indians can also invest in it. Two types of accounts are opened under NPS – Tier-I and Tier-II. If Tier-I is a retirement account, Tier-II is a voluntary account. Any salaried person can start investing in a Tier-II account on his behalf. But the important thing to remember is that the Tier-II account opens only after the Tier-I account is opened. Talk about PPF at the same time, any Indian can open it. This is not for non-resident Indians.

    When can you start investing

    One can invest in NPS from 18 to 65 years of age. A large retirement fund and a subsequent annuity benefit are available when a person reaches 60 years of age during his or her tenure. There is no age restriction in PPF, which can be opened in the name of minor.

    The format of return

    NPS is a market related project. Investors can choose where to deposit money in NPS such as equity, government securities and corporate bonds. So the project’s profitability is not fixed. On the other hand, PPF is a fixed interest rate scheme but the rate changes every quarter. The current interest rate is 7.1 percent per annum.

    Minimum and maximum investment

    All government employees in NPS who joined the service on or after 1 January 2004 are required to contribute 10% of base salary + DA. The state government makes the same contribution even though the central government contributes 14 per cent. Employee contributions in the corporate sector account for 10% of the base salary for an NPS account. An employee’s contribution to a Tier 2 account, ie a voluntary NPS account cannot exceed 20% of the annual income. Every Tier I NPS account with a minimum of Rs. Minimum contribution is not mandatory for a Tier-II account. Speaking of PPF, a minimum of Rs.

    Investment period

    One can invest in NPS for up to 60 years. There is also the option to keep the account up to 70 years old. After retirement at NPS, the employee must take an annuity plan with at least 40% of the total fund, which generates a regular income. 60% of the fund can be fully withdrawn. The expiry of the PPF is 15 years. It can then be increased in blocks of 5-5 years. In PPF, the entire fund receives the total amount by adding deposits and interest on the maturity.

    Tax return

    Tax deductions on deposits can be taken on both NPS and PPF. 1.5 lakh per annum. Everything deposited in PPF, Interest and Maturity Funds is tax free. In addition to deduction of up to Rs 1.5 lakh under Section 80 CCD1 in NPS, additional deduction up to Rs 50000 under Section 80 CCD (1B). Up to 60% of the closing amount is tax free but the monthly annuity income is taxable.

    Where can I open an account

    PPF accounts can be opened at post offices and banks. In the case of NPS, if you are investing part of the salary, then the account is opened by the employer. At the same time, a Tier 2 account is opened at banks, brokers and other financial institutions.


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