According to the tax and investment expert, both are good investment tools to prepare the retirement corpus, but if one wants to take more risk and wants to earn more, nps is better than PPF.
PPF vs NPS: National Pension System or NPS is a voluntary pension contribution system, which the Pension Fund Regulator and Development Authority (PFRDA) runs under its supervision. The NPS investment tool has been created through a pass law in Parliament. However, while investing in NPS, it has been found that people are concoff about the difference between Public Provident Fund (PPF) and NPS. Because both have to deposit money for retirement. According to the tax and investment expert, both are good investment tools to prepare the retirement corpus, but if one wants to take more risk and wants to earn more, nps is better than PPF.
Confusion over PPF vs NPS
Manikaran Singhal, a registered tax and investment expert in SEBI, said both PPF and NPS are voluntary contribution options. When it comes to choosing PPF or NPS, people get confused about who will save more tax. Generally, people invest in NPS after the limit of Rs 1.5 lakh is exhausted under section 80C of income tax in PPF.
Also Read: The good news will now get Rs 3000 pension every month, know about PM’s Shram Yogi Mandhan scheme
Nps can understand this
Manikaran said the NPS has eight fund managers from where up to 60 per cent can opt for equity options. At the time of retirement, one can withdraw 60 per cent of the maturity amount, which is tax free. The remaining 40 per cent will remain in the NPS account for the investor’s pension funding and will be taxable.
Manikaran also said that NPS investment has two options: active mode and auto mode. In active mode, a person can evaluate the annual return and convert from equity to loan and loan to equity option. However, in auto mode, there will be 8 fund managers who will handle one’s investment and change the option of equity and vice-versa from debt. He said that in NPS, one can get income tax exemption on investments up to Rs 50,000 under section 80 CCD.
Comparison of PPF vs Equity Returns
Comparing PPF with NPS, Wealth Management Manager (Wealth Management) of Transcend Consultants, Kartik Javeri said that due to equity exposure in the NPS account, if an investor chooses 50:50 options out of equity and loan option, the loan option will get about 8 per cent return like PPF in the long run, while equity exposure will return at least 12 per cent in the long run.
Money Calculator
According to the calculation, this means, if a person invests Rs 100 in NPS and Rs 100 in PPF, he will get 7.1 per cent interest rate return in PPF while his return in NPS will be 10 (6 +4 = 10), which is 2.9 per cent higher than PPF. So, if an investor wants to take a high risk, an NPS account will return about 2.9 per cent more than ppf at the time of retirement.
