PPF v/s NSC

In India, lots of people look at both NSC and PPF as tax saving instruments.

However, it can also be look at investments for long term goals (retirement, child education).

Lets compare them both:

PPF gives you returns of 8.8% tax free with a lock in for 15 years.

NSC has two variants:

5 years @ 8.6%

10 years @ 8.9%

So, with NSC you do have the option to choose a lower term if you don't want to lock in your funds for 15 years.

However, the game changer is the tax component.

NSC returns is taxable.

PPF returns is not.

Please note this does not imply that one creates as many PPF accounts as possible.

You can create PPF accounts for your kids as well...but as per PPF norms one will not get interest for more than 1L deposit (including sum of all PPF accounts). However I know folks who may claim otherwise.

PPF returns are not fixed. They are governed by Govt and it can change it yearly.

NSC returns are fixed for now and once you make an NSC you can rest assured of the interest rate.

What will you choose?

Obviously there are many more choices like FD, MF  but lets keep that comparison for a different post.

This post is more for comparing NSC and PPF.

What will you choose?

Ir-respective I will always advice a person to open a PPF and look at it from a long term perspective.