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NPS vs PPF: Which is Best for Retirement Planning?



Welcome to Financial Learning, where we discuss various financial topics to help you make informed decisions. In this blog, we will be comparing two popular retirement planning government schemes - NPS (National Pension System) and PPF (Public Provident Fund). Many people in India are confused about which scheme is better and who should invest in which. By the end of this blog, we promise to clear all your doubts. So, let's get started!



Eligibility and Investment Limits

When it comes to eligibility, anyone, including minors, can invest in PPF. On the other hand, NPS is available only for individuals between the ages of 18 and 60. In terms of investment limits, PPF allows a maximum investment of ₹5 lakhs per year, while there is no limit for NPS.



Lock-in Period and Maturity

PPF has a lock-in period of 15 years, after which it can be extended in blocks of 5 years. However, the maturity of PPF will only happen when you reach the age of 60 and are investing until then. On the other hand, NPS has a maturity age of 60, and the maturity will be on the basis of the annuity purchased. The maturity amount in NPS is taxable.




Partial Withdrawal and Premature Exit

With PPF, you can make partial withdrawals after completing 7 years. The first withdrawal is allowed at 50% of the balance, which can be done in case of higher education, marriage, or medical treatment. In NPS, partial withdrawal is allowed only after 5 years of investment, and you can withdraw a maximum of 25% of your own contributions. However, these withdrawals can only be made three times and are subject to specific conditions.

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Tax Benefits

When it comes to tax benefits, PPF offers guaranteed returns and the interest earned is exempt from tax. On the other hand, NPS is market-linked, and the returns are based on the performance of your investments in equity, bonds, etc. The NPS investments are eligible for tax benefits under Section 80C and an additional benefit of ₹50,000 under Section 80CCD (1B). However, at maturity, only 60% of the corpus is tax-free, and the remaining 40% goes to an annuity plan, which is taxable.




Death Benefit

In case of the unfortunate event of your demise, PPF ensures that the entire corpus goes to your nominee. In NPS, the nominee receives 100% of the corpus if it is below ₹5 lakhs. If the corpus is above ₹5 lakhs, the nominee receives 20% of the corpus as a tax-free lump sum, and the remaining 80% goes to an annuity plan which is taxable.





After analyzing the differences between NPS and PPF, one thing is clear - NPS has a higher potential for returns compared to PPF. However, it's important to consider your risk appetite and investment goals before making a decision. If you are looking for a safe and guaranteed return, PPF is a suitable option. On the other hand, if you are comfortable with market-linked investments and want the flexibility to choose the asset classes, NPS can be a good choice. It is advisable to consult a financial advisor and consider your specific requirements before making any investment decision.

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Please note that the information provided in this blog is for educational purposes only and should not be considered as financial advice. The decision to invest in NPS or PPF should be based on your personal financial situation and risk tolerance. It is advisable to consult a financial advisor before making any investment decisions.

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