Small Savings Schemes: Public Provident Fund Vs National Savings Certificate

The government recently hiked interest rates on small savings schemes by up to 0.4 per cent for the October-December quarter, the Ministry of Finance said in a statement on Thursday. Under this revision, the interest rates on National Savings Certificate (NSC) and Public Provident Fund (PPF) have been revised to 8 per cent, from 7.6 per cent at present. After a gap of several years, the government increased interest on small savings, in line with rising deposit rates in the banks. The revised rates would be applicable from October 1, 2018 to December 31, 2018.

PPF accounts are an investment avenue with decent returns coupled with income tax benefits. NSC is also one of the tax-saving investment options available under Section 80C of the Income Tax Act.

In PPF account, a minimum of Rs 500 subject to a maximum of Rs.1,50,000 per annum can be deposited. The subscriber should not deposit more than Rs 1,50,000 per annum as the excess amount neither earns any interest nor is eligible for rebate under Income Tax Act. The amount can be deposited in lump sum or in a maximum of 12 installments per year. Partial withdrawal is allowed every year from the seventh financial year from the year of opening a PPF account.

In National Savings Certificate, investment can be made with a minimum of Rs. 100 and and in multiples of Rs. 100. There is no maximum limit for investment in NSC.

The maturity period of PPF accounts is 15 years but the same can be extended within one year of maturity for further five years and so on. 

In case of NSCs, investors can buy NSCs every month for five years and re-invest the money on maturity. On retirement, as the NSC matures, it fetches a monthly pension.