PPF vs NPS: Public Provident Fund (PPF) and National Pension System (NPS) are long-term investments. However, the motives of both investment options may be different. NPS is purely a retirement scheme. Investments are made in it so that the pension continues after the age of 60 years.
New Delhi: PPF vs NPS: Public Provident Fund (PPF) and National Pension System (NPS) are long-term investments. However, the motives of both investment options may be different. NPS is purely a retirement scheme. Investments are made in it so that the pension continues after the age of 60 years. To get pension through PPF, you have to keep it running even after maturity.
What is the difference between PPF and NPS
PPF is 100 percent debt instrument, that is, all of its money is invested in bonds, while NPS has both debt and equity. In NPS, the investor has the option that he can keep the equity share in it up to 75%. Experts say that if the investor has more risk appetite, he can keep the debt-equity ratio of 50:50, which can give him 10% return in the long term, which is about 3 to 7.1% of PPF. The percent is more.
After maturity in NPS, a minimum of 40% is compulsorily put in annuity, annuity here means pension. This is how you get pension after retirement.
Also get tax rebate
Both PPF, NPS have the benefit of tax exemption on investment. Income tax exemption is available on investment of Rs 1.5 lakh annually in both of these. There is no fixed maturity limit in NPS, whereas PPF matures in 15 years, so those who want to continue investing in PPF for a long period, they should be given 5-5 years each time.
Investment has to be carried forward for a period of. That is, if someone wants to continue PPF for 30 or 35 years, then he can continue it in the block of 5-5 years. Experts recommend that investors should opt for PPF extension as they get the benefit of compounding interest.
Let us now know which option of PPF and NPS gives you more benefit or amount on retirement. Suppose you are 30 years old, you want to invest for the next 30 years so that when you are 60 years old, you have a big amount in your hand, so that your old age can be cut easily.
Investment of Rs 3000 every month in PPF
Age 30 years
Investment Period 30 years
Investment 3000 rupees every month
Annualized return of 7.1%
Total Investment 10.80 Lakh
Maturity Value 37.08 Lakh
If you put 3000 rupees in the monthly PPF, that is, 36000 rupees for the year. If you continue this investment for 30 years, you will get Rs 37,08,219 after 30 years at the current 7.1 percent interest rate.
Investment of 3000 rupees every month in NPS
Age 30 years
Investment Period 30 years
Investment 3000 rupees every month
Estimated Return 8.0%
Total Investment 10.80 Lakh
Maturity Value 44.52 Lakh
If you put 40% of this maturity value in annuity, that is, you put 17.81 lakh in annuity, then your lump sum will be Rs 26.71 lakh and the monthly pension will be Rs 11,874. Here we have taken 8% approximate return on annuity.
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