NPS VS PPF: A COMPARATIVE GLANCENPS VS PPF: A COMPARATIVE GLANCE

Which is the Best Way to Plan your Retirement?

Basics of NPS, PPF and EPF

Why PPF and not EPF when comparing with NPS?

• Although the NPS is strictly comparable to employees provident fund (EFP), the latter is mandated by law. The PPF contributions are fully voluntary. 

• In the NPS, too, only the private sector employees contributions are 100% voluntary in nature while central and state government employees have to compulsorily contribute 10% of their earnings to the NPS scheme.

• Only when an investment instrument is not binding in law does an investor compares its features with another similar non-binding instrument. 

Investment objective

NPS PPF

• Investments made under the NPS scheme are used to invest in securities keeping in mind long-term retirement planning

• Retirement age is around 60 years

• Investments made under PPF scheme are simply a long-term investment scheme

• The tenure for Public Provident Fund (PPF) is of 15 years

1.

Know more about getting started with NPS

Who can invest?

NPS PPF

• All individual citizens of India can subscribe to the NPS scheme

• The minimum-maximum age limit is 18-60 years

• All individual citizens of India can subscribe to the PPF scheme

• There are no age limits in case of PPF

Know more about investing in NPS

2.

Who is the fund manager?

NPS PPF

• The money you invest in NPS is managed by one of the 8 pension fund managers, approved by the government of India

• The money you invest in Public Provident Fund (PPF) is managed by the Central Government of our country

Know more about pension fund managers

3.

Rate of Return

NPS PPF

• No fixed rate of return with NPS

• No yearly pay-outs; returns are accumulated and the investment value appreciates

• Interest is paid out yearly at the end of financial year in public provident fund

• The rate of interest for FY 16 is 8.7%

4.

Did You Know?For NPS, You have to choose your allocation percentages in equities, corporate debt securities

and government securities, and the returns will vary according to these and the fund manager’s ability to optimize returns for you.

Minimum Investment

NPS PPF

• Minimum investment to keep your account alive is Rs 6,000 per year in NPS scheme

• Minimum investment to keep your account alive is Rs 500 per year in PPF scheme

5.

Read about other features of NPS

What is the lock in period?

NPS PPF

• Investments under NPS is locked in till a retirement age of 60 years

• Your investments under the PPF scheme is locked in till 15 years

6.

Read about other frequently asked questions about NPS

What are the tax benefits?

NPS PPF

• NPS offers you tax benefit on the capital appreciation portion of your investment but not on the Principal amount you get on maturity or on withdrawal

• Currently, all investments made in the NPS scheme up to a maximum of Rs 2 lakhs per year is deductible from your taxable income

• PPF offers you tax benefit on the yearly interest earned and is exempt from being taxed and so is the Principal you withdraw or get back on maturity

• Currently, all investments made in the PPF scheme up to a maximum of Rs 1.5 lakhs per year is deductible from your taxable income

7.

Read about the tax benefits of NPS

What happens on maturity?

NPS PPF

• 60% of the NAV is paid back to you, and 40% has to be compulsorily re-invested in an Annuity product by any of the life insurance companies, registered by the Insurance Regulatory and Development Agency

• 100% of your Principal and Interest earned is paid back to you in Public Provident Fund (PPF)

• Liquidity: Partial withdrawals are allowed after the 6th and 7th year

8.

Did You Know?For NPS, Under an Annuity, the principal sum is not returned, but the investor

receives a monthly sum as pension from the annuity service provider (life insurance company).

Can you withdraw or exit prematurely?

NPS PPF

• You can exit prematurely (and halt further monthly contributions), but you will get back only 20% of the current market value of your investments in your NPS account

• The balance, 80%, will be compulsorily re-invested in an Annuity.

• You are permitted to withdraw prematurely but not exit completely. One withdrawal is allowed every year, from the 7th year of the start of your PPF account, of an amount not exceeding 50% of the balance at the end of the 4th year preceding the year of withdrawal

9.

Read about other premature exit from NPS

SummaryParameter NPS PPF

Investment ObjectiveInvesting in securities keeping in mind very long term retirement planning

A long term investment scheme with 15 years tenure

Who can Invest?Individuals falling under the age group 18-60 years

Any individual wishing to invest

Fund ManagerPension Fund Managers approved by Government of India

Central Government

Rate of Return Not fixed 8.7% for FY16Minimum Investment Rs. 6,000 per year Rs. 500 per yearLock in Period 60 years 15 yearsMaximum Tax Deductable from Income

2 lakhs per year 1 lakh per year

On Maturity60% returns and 40% compulsory investment in Annuity product

100% returns

Withdrawal/ Premature Exit Can exit prematurely Can withdraw, but not

exit prematurely

For any further queries, visit www.hdfcsec.com