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In some ways both are
identical...........
Backed by the government hence safety is of
the highest order
A return of 9.5% per annum
Payment of interest is at maturity
For amounts invested up to Rs 60,000,
investments quallify for a tax rebate under
section 88
Premature withdrawal
Loan facility
NSC scores in certain
areas............
The investment tenure is not too long (6
years) as compared to PPF (15 years).
The rate of interest, though identical, is
compounded half-yearly in the case of NSC but
annually in the case of PPF. So the returns work
out to be better for NSC.
Both qualify for a tax rebate under section
88 but in the case of NSC, interest accruing
each year, which is reinvested into the scheme,
also qualifies for a rebate under section 88.
PPF scores in certain
areas............
Interest is taxable in the case of NSC but
deduction under section 80L up to Rs 12, 000 is
available. Interest earned on PPF is totally
tax-free.
PPF gives you the flexibility of investing
anywhere from Rs 100 to Rs 60,000 per annum. NSC
is a one-time amount of Rs 100, Rs 500, Rs 500,
Rs 5,000 or Rs 10,000.
NSC offers premature withdrawal only in
exceptional circumstances unlike PPF.
Which one will it be?
For starters, you can invest in both.
However, if you feel that 15 years is way too
long, then opt for NSC.
If you are investing for retirement, then
PPF scores.
You could also be saving specifically for a
goal. If it is a long-term goal, say your
child's marriage, which should be around 15 to
20 years away, then PPF is the best bet. If you
are investing for a more short-term goal, as in
your child's marriage in say the next 5 to 10
years, then NSC is the investment. However,
please remember that you can invest in both
simultaneously.
Need to get disciplined in your savings?
Then PPF is a better option. You are forced to
save anywhere from Rs 100 to Rs 60,000 per
annum. Also, you can make a maximum of 12
installments in a year. Putting aside a sum at
monthly or quarterly intervals is a good habit
to cultivate.
Need to invest a bonus or a sudden windfall
before you spend it? NSC is a good bet since you
have to put in a one-time investment.
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