I am looking for a long-term retirement vehicle which gives tax benefits as well. Which one should I choose - PPF or NPS?
-Rohit Satija
Both are retirement oriented savings vehicle and are eligible investments under section 80C. But both are very different in their character. You get guaranteed returns from PPF whereas NPS is a market linked investment. Under PPF you don't have an investment option but NPS offers you various investment options to choose from. You also have the option of choosing a fund manager. A withdrawal from NPS is to be directed to buying annuity or it should generate income for you. The post investment phase of PPF is very different from that of NPS.
If you're genuinely looking for retirement saving, then keeping the tax dimension aside which is the same for both of them, NPS is far better structured and should deliver more satisfying returns because it is designed as a very methodical retirement savings plan, whereas PPF is something which is to channelise long-term savings into very safe fixed income. What you do with your investment after 15 years is your choice.
This article was originally published on March 11, 2014.
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