Public Provident Fund vs NSC


If we plan invest some amount in PPF or NSC, in that case first question come in our mind is that what is the comparison between Public Provident Fund vs NSC and which is the best one.

PPF is Public Provident Fund in which you need to open an account in any of the banks of post offices, whereas NSC implies National Saving Certificate, which are bought from post offices.

If you talk about secured small saving instruments in India, you would definitely mention PPF and NSC in the top list.  Both are quite popular in terms of benefits they offer, the only difference being in the rate of interest, payment of proceeds, source, etc.  In this article, we would make a fair comparison of PPF and NSC.

Public Provident Fund vs NSC – A Comparison

Public Provident Fund vs NSC – A Comparison

  • The basic difference between PPF and NSC

PPF is a small saving scheme which facilitates contribution of any amount on monthly as well as lump sum basis.  For example, you can invest Rs 500 in the first month of fiscal year and Rs 20,000 in the second; invest nothing in the third month, and so on.

NSC on the other hand is entirely a different instrument of investment.  It is a certificate issued as a one time investment for a fixed tenure, during which your money grows at a specified rate.

  • In terms of Contributions

In case of PPF, the minimum contribution an account holder has to make within a fiscal year is Rs 500 whereas the maximum could be up to Rs 1.5 lakh.

NSC can be purchased in any amount in multiple of Rs 10,000, Rs 5,000, Rs 1,000, Rs 500 and Rs 100.  That means if you wish to invest Rs 22,500 in NSC, you would have to purchase 2 certificates of Rs 10,000, 2 certificates of Rs 1,000 and 1 certificate of Rs 500 accordingly.

  • In terms of Returns

Both PPF and NSC have a neck to neck competition in terms of rate of interest they offers.  While NSC offers an ROI of 8.5%, which is compounded half-yearly, PPF offers 8.7% to be compounded annually.

  • In terms of Tax Exemptions

Both PPF as well as NSC contributions are eligible for tax exemptions under Section 80C of Income Tax.  The difference lies in the exemptions for the interest earned.  When someone invests in PPF, the investment, the interest as well as the proceeds would all be exempted from income tax.

However, in case of NSC, the interest earned is taxable.  At the same time, the interest paid is tax exempted.

  • The tenures of investments

Public Provident Fund matures at 15 years.  Moreover, you can extend your term of PPF Account by multiple of 5 years.  For example, if you open an account in early twenties, your PPF account would mature in your late thirties.  However, that may be the time when you would be still earning well and may not require the proceed money.  In that case you can extent the term of your PPF Account by 5 years, 10 years, 15 years and so on, as per your requirement.

On the other hand, NSC is purchased on a pre-defined term of 6 years.  In all possibility, you would have to withdraw this amount after six years.  However, if you do not wish to use this amount, you can still reinvest this sum in a fresh NSC altogether.

  • In terms of number of accounts

A PPF account holder can have just one account in his or her name, excluding the account of the minor he/she contributes to.  No other PPF account can be opened for the same person in any other bank or post office.

You can invest in NSC just once.  However, you can have multiple NSCs simultaneously.  There is no minimum of maximum number of NSC you can/should buy.

  • In terms of ownership

PPF account mandatorily has to be a single owned account in which you can’t have more than one account per person and not more than one person can own an account.  You can however nominate a number of people for your account.

On the other hand, NSC can be owned jointly as well as singly and can nominate any number of people for the proceeds.

  • The facilitator of the account

By facilitator here, we mean the banks and post offices that are authorized to open accounts.

In case of PPF, State Bank of India along with many other nationalized banks and post offices can open a PPF account for you, even if you do not have any existing account with the concerned bank or post office.

NSC is a saving certificate offered exclusively by Postal Department of India and only post offices can open an NSC account in your name.

Public Provident Fund vs NSC Comparison Chart

Returns 8.50% 8.70%
Compounded half-yearly annually
Tax Exemptions interest earned is taxable tax exempted
Tenures of investments 6 years 15 years
Number of accounts multiple NSC one account
Ownership owned jointly single owned
Facilitator of the account only post offices banks and post offices

Both the forms of investment have their own merits and demerits on various parameters.  Both PPF and NSC differ in many aspects as discussed earlier in this article and we have to discussed about the Public Provident Fund vs NSC, thus choosing one out of the two will actually depend upon what kind of investment, returns and benefits you are looking for.

Last but not the least, on the basis of Public Provident Fund vs NSC comparison, if you are looking forward to a steady and sustained contribution scheme, there could be no better thing than PPF for you.  However, if you have a lump sum amount that you want to invest with security and let the money grow, you should surely opt for NSC.  PPF is a great way to secure your future, especially your old age and it would be no fallacy if we say that every individual in India should have a PPF account in his/her name.

Here we have to give the comparision between PPF or Public Provident Fund vs NSC that will help you to take the decision for the investment.

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