Know which scheme is beneficial for higher returns before investing
PPF vs. NPS vs. EPF: Before investing, find out which scheme is favorable for a higher return. There are many ways to build up pension funds to receive retirement. However, there are three options you can use to raise money directly: Public Provident Fund, Employees Provident Fund, and National Pension Scheme. These three plans are very popular and better when we talk about some of these better options. These schemes are Public Provident Fund (PPF), Employees Provident Fund (EPF) and National Pension Scheme (NPS).
PPF vs NPS vs EPF: Before you invest, know which scheme is favorable for higher returns
Speaking of PPF, it is a voluntary investment plan i.e. whether to invest in it or not, it is the choice of the investor. While investments in EPF are necessary for private sector employees, NPS has now become mandatory for government employees.
public provision fund
Under PPF account, you can deposit up to Rs 1,50,000 every year. The amount invested in PPF is eligible for deduction under Section 80C. PPF plan comes with a 15 year lock-in period. However, part of this scheme can also be withdrawn after 7 years. The PPF account can be extended for another 5 years after 15 years. This account can also be pre-barred after 5 years. Under this scheme, an investment of Rs 500 to Rs 1.5 lakh can be made. The current interest rate is 8%. You can open a PPF account in the name of yourself or your minor child.
National pension system
This scheme started in 2008. People working in the private sector can invest in this scheme. If you invest in this scheme, you will receive a pension after retirement. You can invest up to Rs 1.5 lakh. Depending on your risk factor, you can invest in different NPS schemes. The investor is granted tax exemption under Section 80C. However, if the individual’s investment is voluntary, according to the 2016 budget, you can take a separate tax deduction of Rs 50,000 under section 80CCD (1B).
Employees Provision Fund
The Employee Provident Fund applies to any company with 20 or more employees. Interest rates in EPF are determined by the EPFO. Interest on EPF is currently available at a rate of 8.5%. Normally one cannot withdraw money from EPF. But if you don’t have a job, you can withdraw money from EPF during that time. Investments in EPF are managed by EPFO. EPF Every company with more than twenty employees is obliged to contribute to the provision fund of its employees. 12% of his base salary and DA is deposited into the employee’s PF account by the employee and the same amount is deposited by the company. EPF also includes pension fund. It is provided to the employee after retirement. The interest on EPF in the current quarter is 8.5 percent. Under certain circumstances, investors may withdraw from their EPF account before the expiration date.
VPF is an extension of EPF. This means that investors can only go for VPF if they have an EPF account. Like EPF, VPF also earns 8.5% interest. If the employee deposits more than 12% of his base salary and DA into PF fund, it is called VPF or Voluntary Provident Fund. Any salaried employee can deposit up to 100% of their base salary and DA into VPF. This arrangement allows the investor to earn huge returns in the long run by increasing their contribution to EPF.
Public Provident Fund i.e. PPF is a very good investment option for creating a pension fund. PPF is a government-sponsored savings plan. The most important thing about PPF is that it has EEE status. This means that in this investment scheme, interest is waived on three levels. The term amount and interest income are also tax-free in this plan. By investing in this scheme, an investor can save income tax of Rs 1.5 lakh every year. This plan has a lock-in period of 15 years. It can be further expanded. At the moment, the interest on PPF is 7.1 percent. Those who want to invest risk-free and do not want to opt for long-term investment options such as NPS or VPF can invest in PPF.
It started in the year 2004, mainly for government employees. It was reopened to the general public in 2009. People between the ages of 18 and 60 can invest in the National Pension System. Under this scheme, accounts can be opened at almost all government and private banks of the country. NPS is managed like an investment fund. This investment option can provide a good return. In NPS, the investor has to deposit an amount every month while working.
Investors can withdraw part of the corpus created after retirement and take an annuity from the balance for regular income. There are three ways of investing in NPS. The first is stocks, the second is corporate bonds and the third is government bonds. Here the investor is given two options to determine his investment. The first is asset allocation and the second is auto choice. Auto choice gets a 50 percent stake in equity initially and decreases over time. With asset allocation, an investor can invest up to 75 percent in equities.
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