NSC vs PPF- A Comparative Guide

NSC vs PPF

Savings is a good habit! To let users save for the future, there are a number of private and government schemes available. The private schemes are generally offered by banks and NBFCs that involve the ease to create fixed deposits, recurring deposits, mutual funds, investing in SIP, etc. Government schemes to save for the future are investing in PPF, EPF, NSC accounts and more.

Table of content-

  1. Comparative difference between NSC vs PPF
  2. What is NSC?
  3. Features of National Saving Certificates
  4. Who should invest in National Saving Certificates
  5. What is PPF?
  6. Features of Public Provident Fund
  7. Who can open Public Provident Fund

In this blog, we will understand the complete comparative difference between NSC vs PPF. The comparison between them will let users know the right option to invest for the future!

A Comparative Difference between NSC vs PPF

Though both NSC and PPF are considered great options to save for the future; however, they still have their set of features that make them different from each other. Following is the comparative difference between NSC vs PPF-

ParametersNSCPPF
Maximum contributionNo upper limitRs. 1.5 lakh
Minimum contributionRs. 100Rs. 500
Tenure5 years, Cannot be extended15 years, Can be extended
Additional investmentsA new has to be created for additional investmentsCan be added to the existing account
OwnershipJoint holding is possible
Investor can nominate another person too
No joint facility available
Nomination facility is available
Premature withdrawalAllowed after maturity
Allowed in case of death or court orders
Allowed after the completion of 5 years
Point of withdrawalOnly 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 accountsInvestors can open multiple accountsOnly one account per individual in their name
Who can investA 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, also known as NSC is a fixed income investment scheme. NSC is a scheme initiated by the Government of India. It can be opened by the applicant through any post office branch. It is considered a savings bond that encourages the savings habit of small to mid-income level investors.

  • NSC is a low risk fixed income investment product
  • It can be opened by the investor from the nearest post office
  • National Saving Certificate can be opened in the name of the investor, for a minor, or with another adult as a joint account
  • 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-

  • The returns on NSC are a little higher than fixed deposits
  • As NSC is a government-backed tax saving scheme, investors can claim an amount of up to Rs. 1.5 lakh under the provisions of Section 80C of the Income Tax Act, 1961
  • The rate of interest given to the investors on NSC is 6.8% per annum. The government revises the interest every quarter. It gets compounded annually but is only payable after maturity
  • National Saving Certificate maturity period is 5 years
  • A minimum amount of Rs. 1,000 can be invested in the NSC scheme
  • Investors can purchase the NSC scheme from any nearby post office just by submitting the required documents or by completing the KYC verification process
  • It is flexible to transfer the NSC certificate from one post office to another post office
  • NBFCs and Banks accepts NSC as collateral or security for secured loans
  • Investors can nominate his/her family member (even minors)
  • After the maturity period of the NSC scheme, the subscribes needs to pay the applicable tax on the principal amount
  • Prewithdrawal NSC amount is not allowed; however, it is only allowed in case of death, or court order issued against it

Who Should Invest in NSC or National Saving Certificate?

Following are the list of people who should or can invest in NSC or National Saving Certificates-

  • 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

What is PPF or Public Provident Fund?

A Public Provident Fund allows an individual to save a part of his/her income annually to build a retirement corpus while earning competitive interest on the deposited amount. PPF offers tax-saving benefits too. It was introduced with an aim to encourage the saving habits of people, especially those who don’t come under the Employee Provident Fund Organisation (EPFO). Investing in a PPF account earns an individual interest on the capital amount and allows him/her to 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 interest paid on PPF is calculated every month and the amount is credited to the account after the completion of the financial year
  • The interest rates are decided by the government every quarter
  • The interest rate is calculated every month on the lower PPF balance in the account after the 5th of every month 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 even without adding contributions
  • There is no restriction to keep the amount invested in the fund after the lock-in period of 15 years
  • Premature withdrawals are allowed but only in case of urgencies and emergencies. In such special cases, required documents and details must be presented

Nomination

  • A PPF account holder can nominate more than one person
  • 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 can get a loan against the balance in the PPF account
  • The loan can be availed between the 3rd and 6th financial year of opening the account
  • The interest charged on the PPF account is 2% per annum
  • 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
  • Failing to repay the principal amount within 36 months will attract an interest rate of 6% per annum
  • In case of acquiring a loan against the PPF account, an individual will not be given any interest until the loan amount is paid
  • It is not possible to take another loan until the first loan amount is paid

Investments

  • Individuals are required to invest Rs. 500 as a minimum value
  • An amount of Rs. 1.5 lakh can be contributed to the PPF account
  • Any contribution of more than 1.5 lakh will be rejected automatically
  • Deposits can be made either by 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

Conclusion

Both PPF and NSC are considered the best to save for the future; however, it depends upon the requirements of the individual to invest in. Besides, it is always advised to check the tenure, withdrawal limits, features, advantages, and more before getting started with the one.

FAQs
What is the maturity period of NSC?
The maturity period of NSC is 5 years.
What is the maturity period of the PPF account?
The maturity period of the PPF account is 15 years.
Should I invest in PPF?
If you would like to lock your amount for a longer run, i.e- 15 years, investing in PPF is a good option.
Can I invest in NSC?
Those who are looking to invest in short term investment schemes can invest in NSC. The maturity period of NSC is 5 years.
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