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Articled explains about Public Provident Fund (PPF) and National Pension Scheme (NPS) stating Key Features, Who can invest in PPF & NPS, Maturity period, Investment limit, Tax benefits, Premature /Partial withdrawal, Mode of Investment, Returns and Risk.

Key Features Public Provident Fund (PPF) National Pension Scheme (NPS)
Who can invest? Any Indian resident (except HUF & NRI). One can also open a PPF account in the name of his or her minor children and can avail tax benefits NPS account can be opened by Indian citizens as well as NRI’s above 18 years and less than 65 years of age
Maturity period A PPF account matures in 15 years. One can also extend this term after 15 years by a block of five years with or without making further contribution The maturity tenure is not fixed. You can contribute to the NPS account till the age of 60 years with an option to extend the investment to the age of 70 years
Investment limit Minimum Rs. 500 annually, with the maximum amount capped at Rs. 1,50,000. There is no limit on contribution as long as it does not exceed 10% of your salary or 10% of your gross total income in case you are self-employed.
Tax benefits All deposits made in the PPF are deductible under Section 80C. Furthermore, the accumulated amount and interest is also tax exempt at the time of withdrawal. Tax benefit is available only on Rs. 1.5 lakh under Section 80CCD (1) of the Income Tax Act, and an additional Rs. 50,000 under Section 80CCD (2).
Premature /Partial withdrawal Partial withdrawals are allowed after the 7th year onwards with some limitation. An account holder can withdraw prematurely, up to a maximum of 50% of the amount that is in the account at the end of the 4th year. After 10 years, account holders become eligible for early, partial withdrawal under specific circumstances. However, to exit before retirement, one must use at least 80% of the accumulated corpus to buy a life insurance annuity.
Can I choose how to invest my money? No Yes, you can choose between equity funds, government securities fund and fixed income instruments, and other government securities
Returns Interest rate is decided by the government. Current Interest Rate is 7.1 %. Interest rate is linked to the market. Potential returns are therefore higher.
Risk Low Moderate

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April 2024