NSC Vs PPF- Which is best and why

The choice of investment instruments is elaborate and requires a careful choice of options at all times. Different investment modes have different benefits and varied parameters of investment. In the current scenario, PPF (Public Provident Fund) and NSC (National Savings Certificate) have emerged as two highly credible modes wherein funds can be invested for future growth. Both these options come with respective benefits and features. This often leads to a potential investor trying to figure out what best suits her/his needs. Generally, many people have both NSC as well as PPF as essential parts of their financial portfolio. This is because having both these instruments as part of the corpus allows one to have a directed and diverse range of benefits. However, before investing in these instruments, it is quite essential for a person to gather a general sense of understanding regarding the potential benefits and other features of both of them. Following is a list of comparative points when it comes to choosing between PPF and NSC for investment:

1. Term of investment:

   PPF comes with a mandated lock-in period of 15 years. This makes such an investment ideal for long-term financial planning and at the same time, this means that PPF cannot serve as an ideal vehicle for any short-term or mid-term investment. An NSC does not any such restrictions, however, as the term of investment is upper-capped at 5 years. Therefore, for returns that you wish to accrue after a short period, NSC scores better than the PPF account.   

2. Range of overall coverage:

   Both PPF and NSC have significant coverage and return privileges. These privileges include the attractive rates of interest that both these options offer. Moreover, the accrued benefits are extensive and serve as an ideal corpus after a period of time. The compounding of interest, however, happens differently in case of PPF and NSC. In case of PPF, the interest is compounded per annum, while in NSC, it is compounded after six months.

3. Tax benefits:

   Most people often invest in PPF or NSC because of the tax benefits that they offer. Section 80C of the Income Tax Act, 1961 governs the rate of tax-exemption that is given on these instruments. As per the mandated terms, tax-exemption to the upper-capping of Rs 1.5 Lac per financial year can be admissible under Section 80C. However, there is a little difference here. In PPF, the earnest interest is not taxable whereas in case of NSC, the earnest interest is taxable under the respective taxation slabs mandated by the CBDT (Central Board of Direct Taxes).

4. Ownership and diversity of possession:

   As per the mandated rules and regulations, a person can have only one PPF account. A person cannot open multiple PPF accounts. However, for NSC, a person can own multiple Savings Certificates with the clause that the newly acquired certificate cannot act as an add-on to the previous NSC balance.

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