The Public Provident Fund (PPF) and the National Pension System (NPS) are seen as a long-term investment tool.
While the public provident fund is considered a completely safe investment, the National Pension System is considered a risky investment because of its dependence on the market. The interest rate on Public Provident Fund is 7.1 percent. Whereas if an individual invests 60% in equity and 40% in debt in NPS, he can get an interest rate of up to 10%.
Tax expert Jitendra Solanki says, “Interest rates on PPF are almost fixed. The central government declares its interest rates every three months. But NPS return is a market linked investment. As per government rules, any NPS account holder can choose up to 75 per cent equity exposure.
Karthik Jhaveri, associated with Transcend Consulting, says, “There is a hope of getting up to 12 per cent returns on equity investment in the long run. Debt exposure remains close to 8 percent. When the NPS account invests in a 60:40 ratio of equity and debt, equity returns are expected to be around 7.2% and debt returns around 3.2 in the long term. According to Jhawari, even at the worst of times, NPS gets 10 percent interest. Suppose you invest in PPF, investing Rs 8,000 a month for 30 years, then you will get Rs 98,88,583 at an interest rate of 7.1 percent.
