NSC vs PPF 2020 – Which is better?

Nowadays, it has become undoubtedly vital for every individual to invest in an efficient, yet advantageous type of an investment plan.

However, the list of numbers of different schemes available in the market offering various features has grown to become tremendous.

Therefore, it is essential for an interested candidate to deeply research about the difference between NSC vs PPF as an investment instrument according to their financial comfort, goals and requirements before planning to buy one.

If you are someone who desires to finance money in a risk-reluctant, secure and yet in a profitable investment plan with great tax-benefits, either one amongst NSC vs PPF can be an appropriate choice as per your preferences. People generally tend to purchase both of these schemes because of their diverse range of benefits.

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Continue reading to comprehend about the basic meaning and key features of both these plans through a NSC vs PPF comparison table, understanding about their characteristics and benefits to easily figure out which is better NSC or PPF, and which will fulfill your financial needs in a greater manner.

What is PPF?

PPF stands for Public Provident Fund which is a long-term investment plan offering to make small contributions for a long period of time.

PPF comes amongst one of the most secure funding schemes offered by the Indian Government, also providing great tax benefits to its holders under Section 80C of the Indian Income Tax Act, 1961.

In a Public Provident Fund scheme, an individual can make a contribution of as minimum as Rs. 500 ranging up to Rs. 1.5 Lakhs a year.

PPF scheme imposes a lock-in period of 15 years which can further be extended in blocks; where one block consists of 5 years of time.

Also Read: What is Provident Fund?

The current rate of interest on PPF which is formulated every quarter by the government is currently 7.1% as of April 2020.

This interest rate is compounded yearly and the profit earned over the invested amount is tax free under the Exempt-Exempt-Exempt (EEE) category.

PPF Interest Rate and PPF Calculator

The given calculation for PPF maturity is done considering the case that an individual is depositing Rs.10,000 annually for a tenure of 15 years at the interest rate of 7.1%.

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Period (in years) (Rs) Opening Balance (Rs) Payment (Rs) Interest Earned (Rs) Closing Balance (Rs)
1010,00071010,710
210,71010,0001,47022,180
322,18010,0002,28534,465
434,46510,0003,15747,622
547,62210,0004,09161,713
661,71310,0005,09276,805
776,80510,0006,16392,968
892,96810,0007,3111,10,279
91,10,27910,0008,5401,28,819
101,28,81910,0009,8561,48,675
111,48,67510,00011,2661,69,941
121,69,94110,00012,7761,92,717
131,92,71710,00014,3932,17,110
142,17,11010,00016,1252,43,235
152,43,23510,00017,9802,71,215
NSC vs PPF – Public Provident Fund

What is NSC?

NSC or National Savings Certificate is the safest scheme offered by the Government of India which features low-risk investments and assures guaranteed returns over it.

This type of scheme is highly acquired by businessmen, employees etc because of its annual tax exemption facilities of up to Rs.1.5 Lakhs and is mainly directed towards low to mid income depositors.

Latest NSC Interest Rates

The interest rate provided on NSC is fixed, which is 6.8% as of June 2020. National Savings Certificate Scheme mandates a lock-in period of 5 years under the VIII Issue bond.

This scheme allows a minimum deposit of Rs. 100 with no maximum imposed limit, hence, making it one of the most flexible investment plans. 

NSC can also be used as a loan collateral with Banks and NBFCs. However, the interest earned on the deposited amount under National Savings Certificate is taxable.

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NSC Calculator and NSC Interest Rate

The table given below is evaluated as per the deposit made of Rs.10,000 for a tenure of 5 years on the interest rate of 6.8%. Please note that the returns are subjected to tax.

Period (No. of years)Total Amount (at start of the financial year) (Rs) Interest Earned (Rs)Total Interest (Rs) Total Amount (at end of a financial year) (Rs)
110,00068068010,680
210,6807261,40611,406
311,4067762,18212,182
412,1828283,01013,010
513,0108853,89513,895
NSC vs PPF – National Savings Calculator


Also Read: NSC Interest Rate Chart 2020

Consequently, the choice of purchase between NSC vs PPF might become a bewildering settlement to make.

Therefore, let’s understand and compare the various contrasting services of features offered under both the plans and depict which one is best between NSC vs PPF.

NSC vs PPF which is better

CharacteristicsNSCPPF
TenureNSC offers 5 years of lock-in time under VIII issue.A lock-in period of 15 years is applicable on investment in PPF.
Rate of InterestInterest Rate remains fixed. The current rate of interest as per July, 2020 is 6.8% which is compounded annually.ROI is formulated every quarter. Compounded annually, the rate of interest as per first quarter of 2020 is  7.1% as on 2020.
Opening an AccountAn NSC Account can be opened offline by from any nearest post office across India.PPF Account can be opened in Post Office or in banks like SBI, HDFC, ICICI etc. You can open PPF account online also in some banks.
Eligibility Apart from NRIs, HUFs, Trusts and Private or Public Companies, any citizen of India is allowed to buy NSC.Any individual citizen of India is allowed to buy a PPF scheme under their name or on the name of a minor under 18 years of age.
Limit on number of accountsNSC does not impose any limit on the total number of bonds a person can obtain.One person can buy only a single PPF plan under their name. However, the same person is allowed to purchase a second plan in the name of a minor.
Minimum Deposit Renowned for its small-savings feature, an NSC Account can be obtained by depositing a minimum or Rs. 100.A PPF Account demands a minimum deposit of Rs. 500.
Maximum DepositThere is no particular limit on the maximum deposit amount in a National Savings Certificate.Annually, a maximum amount of Rs. 1.5 Lakh of deposit is allowed under a PPF Scheme.
Possession of AccountAn NSC Account can be held under a single holder type or jointly amongst two partners.Only one individual can have the authority of ownership in case of a PPF.
Selection of Nominee An account holder is permitted to elect a single nominee for his/her account.One or more nominees under this scheme. However, in case of more than one nominee, it is mandatory to specify the percentage of share of each nominee.
Tax on Return AmountThe maturity sum earned under NCS is taxable as per the concerned individual’s income tax slab.The amount invested and the returns earned from a PPF scheme are all tax exempted under Exempt-Exempt-Exempt (EEE) category.
Tax BenefitsAn annual exemption of up to Rs. 1.5 Lakh can be availed via NSC under Section 80C of the Indian Income Tax Act, 1961.PPF also provides the service to avail an annual tax rebate of up to Rs. 1.5 Lakh under Section 80C of the Indian Income Tax Act, 1961.
Extension in the Invested AmountIt is not possible to finance further in an already invested amount.The invested amount can be extended further by depositing more funds as per the chosen duration.
Loan ServicesNSC Bond can be kept as a loan collateral to avail a loan amount from a bank.PPF offers the opportunity of acquiring loan between the 3rd to 6th year of its tenure.
Premature WithdrawalNot allowed, unless in specified circumstances like death of the policy holder or on an order by court.Yes, allowed after completion of 5 years of the policy’s tenure but only for specified purposes like for treating a critical medical condition, for higher education or in case of death of the holder.
Partial WithdrawalNSC does not permit the activity of making a partial withdrawal.A premature withdrawal can be made after 6 years of the policy’s tenure.
NSC vs PPF

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Henceforward, with the information given on the table above, it becomes quite simple and convenient for an individual to easily figure out which plan they wish to acquire amongst NSC vs PPF as per their financial goals and requirements.

Why is NSC better than PPF

  1. For people who desire to make a short-term investment for say, to collect an amount for their abroad trip or so, a National Savings Certificate is the most ideal plan as it consists of a lock-in period of only 5 years.
  2. An individual who wishes to finance more than 1.5 Lakh in an investment plan should definitely buy NSC as it does not impose any maximum limit of deposits.

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  3. Candidates looking to obtain a joint possession of the account should opt for NSC as it allows to have two members as partners in the scheme.
  4. There is no limit on the total number of National Savings Certificate Bonds a person can acquire.
  5. NSC is the safest investment plan offered by the government, hence, making it beneficial for people who wish to buy risk-reluctant schemes.

Also Read: List of Top Term Plans in India

Why is PPF better than NSC

  1. A person who is looking to invest in a long-term plan with the purpose of collecting money for their child’s marriage or for securing their retirement, etc should invest in PPF.
  2. During a financial strain or crisis, the Public Provident Fund provides an individual with a facility to acquire loan against it from the start of its 3rd up till 6th year.
  3. Comparing the current rate of interest of NSC and PPF, NSC is offering 6.8% whereas PPF is offering 7.1%. Hence, returns on PPF are 0.3% more than NSC.

    Also Read: Latest SBI FD Rates

  4. The amount invested and interest earned over Public Provident Fund is tax-free as it falls under the Exempt-Exempt-Exempt category.
  5. It is comparatively easier to open a PPF Account as it is available on both, online and offline portals and is also accessible at every Public and Private Banks.

Therefore, if you are someone who is interested to make an investment of lets say Rs. 1.5 Lakh for a short-term of 5 years and wish to attain low-risk and assured returns, NSC might be the most suitable plan for you.

Whereas, if you are looking forward to make long-term investments at higher interest rates than as compared to NSC, PPF is going to be an appropriate choice as it also offers tax-free returns under EEE Category.

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