Home / Money / Personal Finance /  PPF vs NPS: Where should you invest for better returns? Read what experts say

Public Provident Fund (PPF) is a long-term investment tool and those investors who have low risk appetite, they prefer to this tool for retirement fund accumulation. But, on the other hand National Pension System (NPS) is a risk-oriented retirement fund accumulation tool and it is market-linked. So, like PPF, NPS is not a 100% risk-free investment tool.

According to tax and investment experts, PPF is an ideal place to park one's money if one's risk appetite is low. In the case of an investor who has little appetite to take risk then NPS account is one of the most preferred investment tools for them.

Major confusion between PPF vs NPS

Manikaran Singhal, founder at said, "Both are voluntary contribution options and have different features. Both are long term investment options, where PPF is a fixed interest product, NPS has market linked features in it. Both can be used for 80C tax savings where as in NPS one can invest 50,000 more to save taxes under section 80CCD which is over and above section 80C limit of 1.50 lakh." He said that one may also invest in any of these or both of these. But investor should have higher risk appetite and should be prepared for longer lock in for NPS.

PPF vs equity returns compared

On what investors should choose between PPF and NPS, Kartik Jhaveri, manager — Wealth Management at Transcend Consultants said, "Due to the equity exposure in NPS account, if an investor chooses the 50:50 option of the equity and the debt options, in the long-run debt option would give around 8% returns while the equity exposure would give at least 12% returns in the long-term. So, the net NPS interest rate in the long-term in this debt-equity ratio will be around 10%."

So, at a time when PPF interest rate is 7.1%, NPS interest rate would be around 2.9% higher if the investor chooses 50:50 ratio in the debt and equity NPS account.

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