NSC Vs PPF - Which One To Choose?

Investor may plan his portfolio to include PPF or NSC or both depending upon his return expectations

NSC Vs PPF - Which One To Choose?
NSC Vs PPF - Which One To Choose?
Suresh Surana - 10 April 2021

Stephen, Mumbai

For tax saving NSC v/s PPF Which one is better and why?

The various aspects of investing in NSC and PPF are as highlighted below:

Particulars

Investment in PPF

Investment in NSC

Amount of Contribution

The minimum amount to be contributed in PPF is Rs. 500 p.a. whereas the maximum contribution can be upto Rs. 1,50,000 p.a.

The minimum amount to be contributed in NSC is Rs. 100 whereas there is no limit on the maximum contribution in NSC.

Interest Rate

The interest rate generally is between 7 per cent to 8 per cent

The interest rate generally is between 7 per cent to 8 per cent

Compounding Effect

The interest is compounded annually.

The interest is compounded half yearly.

Tax Deduction for Investment

The amount invested in PPF is eligible as deduction u/s 80C upto Rs 1,50,000

The amount invested in PPF is eligible as deduction u/s 80C upto Rs 1,50,000.

Tax Treatment of Interest

The interest derived from PPF is entirely exempt

The interest derived from NSC is taxable but, however, since the said interest is reinvested, the same can be claimed as a deduction u/s 80C subject to the limit of Rs 1,50,000.

Withdrawal

Withdrawal from PPF is allowed after 5th year.

No withdrawal is allowed from NSC.

Maturity Period

The maturity period for PPF is 15 years which can be further increased by 5 more years.

The maturity period for NSC is 5 years.

Number of Accounts

Only one PPF account can be opened at a single point of time

Multiple NSCs are allowed to be open at a point of time.

Thus, based on the aforementioned aspects, the investor may plan his portfolio to include PPF or NSC or both depending upon his return expectations, lock in period, fund availability.

Suresh Surana is the Founder of RSM India

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