PPF-NPS News / Which scheme will earn more money, PPF or NPS, where will you get better interest

PPF-NPS News: To avoid financial hardship after retirement and to ensure a comfortable life, a well-planned financial strategy is essential. In India, two government-backed schemes—Public Provident Fund (PPF) and National Pension System (NPS)—are excellent investment options for retirement. Both schemes offer safety, attractive returns, and tax benefits. Let’s explore them in detail.

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Public Provident Fund (PPF)

PPF is a long-term savings scheme specially designed for salaried employees. It offers a great combination of secure investment and tax benefits.

Key Features of PPF:

• Investment Process: Employees deposit 12% of their basic salary and dearness allowance into the PPF account every month. The employer contributes an equal amount. The maximum monthly deposit limit is ₹15,000, but employees can voluntarily contribute more.

• Interest Rate: Currently, PPF offers an annual interest rate of 8.25%, managed by the Employees’ Provident Fund Organisation (EPFO).

• Tax Benefits: Under Section 80C of the Income Tax Act, 1961, deposits up to ₹1.5 lakh are eligible for tax exemption. Additionally, interest earned on deposits up to ₹2.5 lakh per year is tax-free. After five years of continuous service, the entire matured amount becomes completely tax-exempt.

• Benefits: PPF is ideal for those seeking risk-free investment and guaranteed returns.

The biggest advantage of PPF is its security and stability, making it a trusted option for retirement planning.

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National Pension System (NPS)

NPS is a flexible, market-linked retirement scheme available to all Indian citizens between 18 and 70 years of age. It suits individuals who are open to some risk in exchange for potentially higher returns.

Key Features of NPS:

• Investment Process: Funds in NPS are invested in equities, debt instruments, and government securities. The minimum contribution is ₹500, and there is no upper limit.

• Interest Rate: Returns in NPS are not guaranteed as they depend on market performance. However, historically, NPS has delivered 8–10% annual returns.

• Tax Benefits: Contributions up to ₹2 lakh are eligible for tax deduction under Sections 80C and 80CCD(1B).

• Withdrawal Rules: At retirement, 60% of the corpus can be withdrawn as a lump sum, while the remaining 40% must be used to purchase a monthly pension (annuity).

NPS is suitable for individuals who want a diversified investment portfolio and are willing to accept market-linked returns.

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Comparison: PPF vs NPS