New Delhi: When planning for a financially secure future, choosing the right investment avenue is crucial.
Apart from Provident Fund (PF), Public Provident Fund (PPF), and National Pension System (NPS) stand out as formidable options for retirement planning.
However, deciding between the two can often be perplexing.
Here, we delve into the merits and demerits of both PPF and NPS to help you make an informed decision.
PPF (Public Provident Fund):
PPF is a long-term government-backed savings scheme renowned for its reliability in retirement planning.
Here’s a breakdown of its advantages and disadvantages:
Advantages:
- Considered a safe investment with government-determined returns.
- No upper limit on investment amount; allows contributions ranging from Rs 500 to Rs 1.5 lakh annually.
- Tax benefits under Section 80C of Income Tax Act, with both investments and interest earned being tax-exempt.
- Open to Indian citizens aged 18 and above, offering accessibility to a wide demographic.
Disadvantages:
- Lock-in period of 15 years, limiting liquidity.
- Returns may be comparatively lower than market-linked investments in the long run.
NPS (National Pension System):
NPS, designed as a retirement savings plan by the government, offers a different set of advantages and disadvantages.
Here’s a breakdown:
Advantages:
- Provides a retirement corpus with flexibility, allowing partial withdrawals of up to 60% at retirement age.
- Offers an avenue for regular investments, aiding in long-term wealth accumulation.
- Open to Indian citizens aged 18 to 70 years, ensuring inclusivity.
Disadvantages:
- Market-linked returns subject to market risks, potentially leading to fluctuating returns.
- Compulsory annuitization of 40% of the corpus at retirement, limiting immediate access to funds.
- Lack of guaranteed returns, posing uncertainty in retirement planning.
Which one will you choose?
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