₹10 lakh in PPF vs ₹10 lakh in NSC: How do maturity periods, returns and income tax benefits compare for investors?
Are you looking to invest ₹10 lakh in a government-backed savings scheme? Then you can consider several popular savings schemes such as the Public Provident Fund (PPF) and National Savings Certificate (NSC). Both these schemes can offer aspiring investors assured returns, peace of mind, and income tax benefits.
Still, it should not be overlooked that these schemes cater to different objectives. They have distinct investment limits, maturity periods, interest payouts and withdrawal flexibility. For example, the PPF scheme does not permit an investor to invest ₹10 lakh in a lump sum.
Furthermore, the key difference between the NSC and PPF is that the PPF is designed for long-term wealth creation. Whereas the NSC scheme is a straightforward 5-year fixed-tenure savings instrument.
Let us now look at the salient features of both schemes, including their maturity limits, returns, income tax benefits, and a host of other important aspects. This will help aspiring investors to make a prudent investment decision based on their current financial situation.
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Another extremely vital question for aspiring investors concerns the investment limits of the schemes discussed above, i.e., the NSC and PPF. The complete details of the same are explained below:
As of today, PPF offers investors 7.1% annual interest. Still, investors cannot deposit ₹10 lakh into this scheme in a single go. This is because the scheme's annual investment ceiling is ₹1.5 lakh. That is why investments in PPF must be spread across multiple financial years if higher investments are targeted.
Furthermore, the PPF account will mature after the completion of 15 years. This is calculated from the end of the financial year in which it was initially opened. Once the maturity period is over, investors can extend their PPF accounts in 5-year blocks, with or without further contributions. Partial withdrawals and loans are also available subject to prescribed rules and conditions.
The most lucrative advantage of the PPF scheme is its exempt-exempt-exempt (EEE) tax status. This makes contributions made in this scheme qualify for Section 80C deductions, whereas the accumulated interest and maturity proceeds are completely tax-free.
NSC investment currently offers 7.7% interest for October-December 2026, with a 5-year maturity period. This is a slightly different investment in comparison with a PPF; in this, investors can also plan and invest ₹10 lakh at once, and the applicable interest rate remains fixed throughout the investment tenure.
Furthermore, interest compounds on an annual basis along with the principal at maturity. Still, the interest earned is taxable under the investor’s applicable income tax slab.
Now, for a ₹10 lakh NSC investment made at 7.7% interest, the estimated maturity value after the completion of 5 years will be approximately ₹14.49 lakh; this includes ₹4.49 lakh of interest, before considering the applicable income tax provisions.
It is now clear that both these schemes are designed to cater to different investment objectives. Both of them also qualify for deductions under Section 80C, subject to the overall annual limit of ₹1.5 lakh. Still, this specific benefit is only available under the old income tax regime and not under the new tax regime.
In the NSC scheme, the interest accrued during the first 4 years is treated as reinvested and can even qualify for Section 80C deductions. This is subject to the overall limit. However, the interest is going to remain taxable as income. Furthermore, interest earned in the 5th year is also taxable but is not reinvested for another deduction.
Hence, the PPF scheme has a clear taxation advantage over the NSC scheme. Therefore, investors seeking tax-free accumulation can aim to invest in PPF. Whereas those aiming to secure a higher fixed interest rate and a shorter investment horizon can aim to invest in the NSC scheme.
If you are an investor seeking long-term, tax-free savings and retirement-oriented wealth, you may find PPF to be the more prudent investment option. Those aiming to invest a large lump sum for 5 years at a reasonably higher, predictable interest rate (e.g., 7.7%) can invest in the NSC scheme.
Finally, investors should account for NSC’s annual tax liability before comparing its headline return with PPF’s tax-free interest. Secondly, seek professional advice when selecting an investment option.
This is because every individual has different financial goals, aspirations, needs, family responsibilities and also different life stages. That is why investment decisions should be made after proper due diligence and professional guidance from a certified financial advisor.
Shivam writes on personal finance, equity markets, and mutual funds. He has previously contributed to several leading publications, including Moneycontrol. He can be reached at shivam.shukla@htdigital.in
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HomeMoneyPersonal Finance ₹10 lakh in PPF vs ₹10 lakh in NSC: How do maturity periods, returns and income tax benefits compare for investors?
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