NSC vs PPF- A Comparative Guide

Saving is a good habit!

There are a variety of private and government schemes available to help users save for the future. Private schemes are typically provided by banks and NBFCs and include the ability to easily create fixed deposits, recurring deposits, mutual funds, and SIP investments, among other things. Government schemes to save for the future are investing in PPF, EPF, NSC accounts and more.

Table of Content-
Comparative difference between NSC vs PPF
What is NSC?
Features of National Saving Certificates
Who should invest in National Saving Certificates
What is PPF?
Features of Public Provident Fund
Who can open Public Provident Fund

In this blog, we will examine the key differences between NSC and PPF. The comparison between them will inform users about the best option for future investment!

A Comparative Difference between NSC vs PPF

Though both NSC and PPF are considered excellent ways to save for the future, they each have unique characteristics that set them apart. The following is a comparison of NSC vs PPF-

Parameters	NSC	PPF
Maximum contribution	No upper limit	Rs. 1.5 lakh
Minimum contribution	Rs. 100	Rs. 500
Tenure	5 years,Cannot be extended	15 years,Can be extended
Additional investments	A new has to be created for additional investments	Can be added to the existing account
Ownership	Joint holding is possible Investor can nominate another person too	No joint facility available Nomination facility is available
Premature withdrawal	Allowed after maturity Allowed in case of death or court orders	Allowed after the completion of 5 years
Point of withdrawal	Only at post office (from where the scheme was purchased)	From wherever it is taken Download From C and submit it to the nearest PPF office
Number of accounts	Investors can open multiple accounts	Only one account per individual in their name
Who can invest	A person who is looking for a safe investment option Anyone who would want to earn a steady interest while saving on taxes The scheme is only open for individual Indian resident citizens	Only Indian citizens An Indian citizen settled abroad Parents/guardians on behalf of their minor children

What is an NSC or National Saving certificate?

The National Saving Certificate, abbreviated as NSC, is a fixed-income investment scheme. It was started by the Government of India. It is classified as a savings bond because it encourages low- to middle-income investors to save.

• NSC is a low risk fixed income investment product
• The investor can open it at the nearest post office
• A National Saving Certificate can be opened in the name of the investor, for a minor, or as a joint account with another adult
• It has a fixed maturity period of 5 years
• There is no maximum limit on the purchase of a National Saving Certificate
• An investment of up to Rs. 1.5 lakh can let an investor have a tax break under Section 80C of the Income Tax Act

What are the Features of the National Saving Certificate or NSC?

Listed below are the features of the National Saving Certificate or NSC-

• NSC yields slightly higher returns than fixed deposits
• As NSC is a government-backed tax saving scheme, investors can claim up to Rs. 1.5 lakh under Section 80C of the Income Tax Act of 1961.
• The annual interest rate paid to NSC investors is 6.8 percent. Every quarter, the government revises the interest rate. It is compounded annually, but it is only payable upon maturity
• The maturity period of a National Saving Certificate is 5 years
• The NSC scheme requires a minimum investment of Rs. 1,000
• Investors can purchase the NSC scheme at any nearby post office by submitting the necessary documents or completing the KYC verification process
• It is possible to transfer an NSC certificate from one post office to another
• NSC is accepted as collateral or security by NBFCs and banks for secured loans
• Investors may nominate a member of their family (even minors)
• After the NSC scheme’s maturity period, subscribers must pay the applicable tax on the principal amount
• Pre-withdrawal of NSC amounts is not permitted; however, it is permitted in the event of death or a court order issued against it

Who Should Invest in NSC or National Saving Certificate?

The people who should or can invest in NSCs (National Saving Certificates) are as follows:

• A person looking for a secure investment option
• Anyone who wants to earn a consistent rate of return while saving money on taxes
• The scheme is only available to individual Indian residents

What is PPF or Public Provident Fund?

A Public Provident Fund allows an individual to save a portion of his or her income each year to build a retirement corpus while earning competitive interest on the amount deposited. PPF also provides tax advantages. It was introduced with the intention of encouraging people’s saving habits, particularly those who do not belong to an Employee Provident Fund Organization (EPFO). Individuals who invest in a PPF account earn interest on the capital amount and can claim tax deductions of up to Rs. 1.5 lakh under section 80C of the Income Tax Act.

What are the Features of PPF or Public Provident Fund?

There are a number of PFF features that can let an individual take benefit of-

Interest rates

• The amount of interest paid on PPF is calculated monthly and credited to the account at the end of the financial year
• The interest rates are decided by the government every quarter
• Every month, the interest rate is calculated on the lower PPF balance in the account from the 5th to the last date of the month
• It is advised to contribute an amount to the PPF account before the 5th of every month

Lock-in period

• PPF minimum lock-in period is 15 years
• An individual can withdraw the full corpus amount at the end of 15 years
• An individual can keep the amount invested in the PPF account for a longer period of time even if no additional contributions are made
• There are no restrictions on keeping the amount invested in the fund after the 15-year lock-in period
• Premature withdrawals are permitted but only in cases of urgencies and emergencies. In such cases, necessary documents and details must be presented

Nomination

• A PPF account holder may name more than one beneficiary
• By nominating a person or more than one person, it is required to mention the percentage of share for all the nominees
• There isn’t a nomination facility in the case of PPF account for minors

Loans

• PPF account holders are eligible for a loan based on the balance in their PPF account
• The loan is available between the 3rd and 6th financial year of opening the account
• The interest rate on the PPF account is 2% per year
• The principal amount has to be repaid first within 36 months from the first day of the month following the month in which the loan was taken
• Principal amount can be paid in a lump sum or in two or more monthly instalments
• Failure to repay the principal amount within 36 months will result in a 6% annual interest rate
• If a loan is obtained against a PPF account, no interest will be given until the loan amount is paid off
• It is not possible to obtain a new loan until the first loan has been paid off

Investments

• Individuals are required to invest a minimum of Rs. 500
• A maximum of Rs. 1.5 lakh can be deposited into the PPF account
• Any contribution of more than 1.5 lakh rupees will be automatically rejected
• Deposits can be made in cash, cheque, demand draft or online

Who can Open a PPF Account?

Listed below are the people who are eligible to open a PPF account-

• An Indian citizen settled abroad can continue operating his/her PPF account
• Only Indian citizens are eligible to open a PPF account
• Parents/guardians on behalf of their minor children can open a PPF account

*It is to be noted that joint accounts and multiple accounts are not allowed to be opened