The money received in PPF on maturity is tax free. 60% of NPS money can be withdrawn on maturity and 40% has to be invested in a life insurance plan. Later pension comes from that. The amount of pension is taxed.
People invest for a long time in PPF PPF and NPS NPS. The longer the investment, the more profit. The only difference between the two is that you can withdraw full or part money of PPF maturity. On the other hand, 60 percent of the NPS amount can be withdrawn and 40 percent has to be deposited in the annuity. There is a facility to save tax in both the investment options. Tax exemption is available under section 80C of Income Tax. However, the exemption limit and rules are different in both. Before taking PPF or NPS, information about tax rebate should be taken.
Both can deposit money according to their investment. However, it has to be kept in mind that if the maturity amount is more, then invest more from a young age. This can lead to more benefits in the long run. Before knowing the tax benefits on both the plans, it is important to know about both the schemes. Both the plans have their own role. While PPF is considered an effective instrument considering the returns, then NPS can be considered as the best medium for retirement fund.
These benefits are available on PPF
PPF is a 15-year scheme on which a fixed return is available. This return is given on the maturity of the plan. The rate at which the interest rate is fixed by the government, the depositor is given the same rate of return on maturity. Currently, the interest rate on PPF is 7.1 percent. Under PPF, you can invest from Rs 500 to Rs 1.5 lakh in a year. It can be understood with an example. Suppose a person deposits Rs 1.5 lakh every year for 15 years. If you look at the interest of 7.1%, then Rs 40.68 lakh is made on maturity.
There is no tax on the maturity amount of PPF. If you want, you can deposit the maturity amount more for the next 5 years. Accordingly, a huge tax free amount can be raised by re-depositing the PPF money every 5 years. PPF is getting less interest than before, but from the tax point of view, it is a profitable deal from other means. Considering the inflation rate and the facility of tax rebate, you can consider PPF as a good investment option.
Benefits of NPS
Considering NPS as a good option for retirement, you can invest. In this, pension is given compulsorily. Keep depositing money in the NPS scheme at your own convenience and the scheme matures at the age of 60 years. On maturity of the scheme, the depositor can withdraw 60% of the amount. This money is completely tax free. The remaining 40 percent is to be paid in the form of annuity to the life insurance company, from which pension is given later. The pension which comes in the hands of the depositor is taxed.
According to tax, information about NPS and PPF has been given here. Now it depends on you whether you want to deposit money in terms of returns or retirement fund. If you want guaranteed returns then you can invest in PPF and if you want money for retirement then you can invest in NPS. If we look at the investment point of view, then both are the right options. You should start investing by looking at your priority.
