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Investing Rs 1.5 lakh or more? NSC vs PPF – Two safe options compared for you

Rajeev Kumar
NSC vs PPF: Which is better?

NSC vs PPF: National Savings Certificate (NSC) and Public Provident Fund (PPF) are popular savings schemes offered by Post Office. PPF account can also be opened at some banks. Both these instruments can be used for tax saving and investment purposes. The maximum amount one can invest in PPF in a Financial Year is Rs 1.5 lakh. There is no upper limit in case of NSC. While the minimum amount one can deposit in PPF in a financial year is Rs 500, the minimum amount for which an NSC can be purchased is Rs 100.

Deposits in both schemes enjoy sovereign guarantee. While the currently available NSC VIII has a lock-in period of five years, Public Provident Fund matures after 15 years. Both of them have their distinct benefits and features. But the interest rate of both schemes is the same at 7.9 per cent and it is compounded annually. The interest rate of these savings schemes is revised by the government quarterly.

In case of PPF account, deposits, interest earned during the tenure of the account and the amount withdrawn on maturity are tax-free.

However, in case of NSC, only deposits qualify for tax rebate under Section 80C of IT Act. The interest earned through NSC is taxable, but deductible under Section 80 C. The final year’s interest on NSC, however, cannot be deducted under Section 80 C.

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You can pledge the NSC in bank as security for taking loan without losing the Section 80C benefits guaranteed by the certificate. This facility is not available with PPF.

Public Provident Fund account holders can also apply for a loan without pledging any asset as collateral but the with certain conditions: 1. PPF subscriber can take loan "any time after the expiry of one year from the end of the year in which the initial subscription was made but before expiry of five years from the end of the year in which the initial subscription was made".

2. The loan amount should not exceed "25 per cent of the amount available to his credit at the end of the second year immediately preceding the year in which the loan is applied for."