Are you among those exploring investment options for your parents? You may take a decision after reading this! NPS vs SCSS vs PPF: COMPARED!
National Pension System (NPS)
National Pension System (NPS) is a government offered retirement cum pension scheme. By investing in NPS, the investors get the dual benefit of tax-saving and retirement planning. Contribution towards an NPS account provides a benefit to individuals by way of a deduction under Section 80C. Not just it secures your retirement planning, but it also saves taxes of up to Rs 1,50,000 a year. The best part is both private and government employees can invest in this retirement planning scheme.
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Eligibility: Anyone in the group of 18-65 years can invest in this. The minimum amount to invest in their NPS account is Rs 1,000.
Features: A person can get additional tax deduction of Rs 50,000 under Section 80CCD(1B). He can claim a tax deduction of up to 20 per cent of his salary contributed towards NPS. Interestingly, the returns earned on NPS are exempted from taxation. The account is matured once the investor retires or attains the age of 60 years. On maturity, the person can withdraw up to 60 per cent of the amount accumulated in the account while the rest 40 per cent is used to purchase an annuity plan.
Interest Rate: Unlike Public Provident Fund (PPF), Employees’ Provident Fund (EPF), Voluntary Provident Fund (VPF), the returns on NPS are not fixed. The returns are completely market-driven and dependent upon your fund manager’s performance and the asset mix that you select.
Senior Citizen Saving Scheme (SCSS)
Senior Citizen Saving Scheme (SCSS) is a government-backed retirement benefits programme. The aim of the scheme is to help senior citizens by ensuring a regular flow of income post-retirement. It guarantees returns on a quarterly basis. One can avail the SCSS through certified banks and post offices in India. SCSS suits senior citizens looking for a high fixed rate of return and a regular income on a quarterly basis.
Eligibility: SCSS, the investment period is 5 years, with an option to extend it for 3 more years.
Features: the SCSS is a safe and reliable investment. Gives high returns if compared to FD or savings account, and at the same time, it provides tax benefit of up to Rs 1.5 lakh. The total limit is capped at Rs 15 lakh. Interest earned in Senior Citizen Saving Scheme is fully taxable and is to be added to ones income from other sources.
Interest rate: SCSS is offering a rate of 7.4 per cent per annum for the current April-June quarter.
Public Provident Fund (PPF)
Public Provident Fund (PPF) is a savings scheme offered by the central government. It was started with the aim to provide old age income security to self-employed individuals and workers from unorganised sectors. People working in the informal sector or unorganised sector, as well as unemployed, self-employed, can invest in PPF.
Eligibility: Any Indian citizen can open a PPF account either in his own name or on behalf of a minor. Only an Indian resident can only open a PPF account. NRIs are not eligible to open PPF accounts. However, a resident Indian who has become an NRI after opening an account can continue the account until maturity. Parents/guardians can also open PPF accounts for their minor children. However, the opening of joint accounts and multiple accounts are not allowed
Features: Taxpayers can claim tax deductions of up to Rs 1,50,000 annually by investing in PPF. The minimum investment of Rs 500 should be made in a year. One cannot invest more than Rs 1,50,000 a year. The returns offered by PPF accounts are fixed and are backed by sovereign guarantees. The deposited amount is locked in for 15 years can be withdrawn on maturity.
Interest: The rate of return is 7.10 per cent per annum in the case of PPF
Other details to consider
SCSS is for those who have already attained the age of 60 years, while the other two NPS and PPF options are for those who want to build on the years before retirement. SCSS accepts one deposit in multiples of Rs 1,000 up to Rs 15 lakh. An SCSS account can be opened with up to Rs 1 lakh in cash or above Rs 1 lakh by cheque.