PPF vs NSC

As the amount in the end of the tenure is tax free, as well as it has a premature withdrawal facility post the 5th year.

About PPF

Public Provident Fund (PPF) is a government held small savings scheme, which generally provides high interest rates and is secure. An individual can make a minimum investment into a PPF Account of Rs. 500 and a maximum of Rs. 1 lakh per annum, for a term of 15 years. The interest you can earn is 8.70% and is compounded on a yearly basis. For a PPF account held by an individual, entitles them to a few benefits:

• Small investments can be made by the individual for a long period of time.
• The total sum of the PPF account inclusive of interest is tax free, and free from wealth tax as well.
• You can enjoy a rebate in taxes, under section 80C of the Income Tax Act of 1961.

About NSC

A savings scheme held by the post office is called a National Savings Certificate (NSC). This is also a government held small savings scheme like the Public Provident Fund, and is the safest and widely available investment option.

While investing in an NSC an individual can make a minimum investment of Rs. 500 and can have no upper limit on the maximum amount of investment made in a year. This type of savings scheme has a lock in period of 5 years and 10 years, with the interest being calculated at 8.60% for a 5 year period and an interest rate of 8.90% 10 years period and compounded twice a year.

The NSC Benefits are as follows:

• The individuals can claim for tax exemption under the section 80C of the Income Tax Act 1961, for the first 5 years.
• The NSC can also be pledged against a loan or advance taken from a financial institution.