PPF Vs NPS: Which scheme is beneficial for higher returns, know before investing

If you want to invest for retirement, then these two schemes of the government can give you better returns. Let us tell you that in order to make a good retirement corpus, it is necessary that we should start retirement planning as soon as we start the job.

Two government schemes Public Provident Fund (PPF) and National Pension System (NPS) are very popular among the salaried people for investment for retirement purposes. Anyone can invest in PPF. At the same time, the National Pension Scheme (NPS) is being run by the government. Know their details…

National Pension System
You can open an account for National Pension Scheme in any bank, post office or insurance company. On maturity of the NPS account, the investor has to put at least 40 percent of the amount in the annuity. The subscriber gets pension from this amount. Annuity is a contract between you and the insurance company. Under this contract, it is necessary to buy an annuity of at least 40 percent of the amount in the National Pension System (NPS). The higher the amount, the higher will be the pension amount.

The amount invested under annuity is received in the form of pension after retirement and the balance amount of NPS can be withdrawn in a lump sum. However, this pension comes under the tax net. There is no fixed return. It depends on the returns earned by the fund from investments in equity and debt.

Benefits of NPS
On maturity of NPS, 60 percent of the amount is tax free. Only 40 percent of the amount is taxed. The limit of contribution in the NPS account of government employees is 14 percent. You can claim tax exemption under this scheme. The limit of tax exemption under section 80CCE is 1.5 lakhs.

Public provident fund
PPF is a 15-year savings scheme. The interest rate on this is fixed by the government every quarter. At present the interest rate is 7.1 percent. If you deposit 1.5 lakh in PPF every year, then after 15 years it will become Rs 40.68 lakh at an interest rate of 7.1 percent. This maturity amount is tax free. After this, PPF can be continued even further in blocks of five years. If we look at inflation and pre-tax returns of PPF, it is still a great investment instrument. PPF is a good way to build a retirement fund over the long term. However, there is no provision for monthly pension in this.

Maturity amount and interest are also tax free
A maximum of Rs 150000 can be deposited in PPF account every year. Investment in PPF is eligible for tax deduction under Section 80C of Income Tax. In this, the amount and interest received on maturity is also tax free. The maturity period of PPF is 15 years. However, pre-mature withdrawal can be done after 7 years. Currently, 7.1 percent annual interest is being given on PPF. Compounding is done annually.