KVP, PPF, NSC Which is best? Comparison Chart - Detailed Analysis (2024)

FAQs

Which is better KVP or NSC? ›

NSC has an investment tenure of 5 years, while the tenure of KVP varies depending on the Ministry of Finance. While KVP accounts can be encashed after 2.5 years of account opening, NSC doesn't allow any premature withdrawals. However, both NSC and KVP allow you to pledge the amount to a bank and apply for a loan.

There is no point in accumulating interest if you simply pay it on taxes. An interest earned under PPF is not taxable, meaning you get to keep the entire amount to yourself. In contrast, interest earned under KVP is considered income from other sources, thus making it liable to taxes.

Choose PPF if you have a long-term horizon, need tax-free returns and are planning for goals like retirement. Choose NSC if you have a medium-term goal, prefer a higher fixed interest rate, and don't mind paying taxes on the interest earned.

Both Kisan Vikas Patra (KVP) and Fixed Deposit (FD) are widely regarded as safe investment options. KVPs are backed by the Government of India, offering investors a secure avenue for their funds.

Earning potential: Although both options earn interest, NSC generally offers higher interest rates compared to a FD. However, FDs tend to benefit slightly from more frequent compounding (usually quarterly) compared to NSCs' annual compounding. This can lead to a better overall yield over the 5 years.

You will not get any tax deductions on your interests or returns. NRIs and the Hindu Undivided Families (HUFs) are not eligible to purchase a KVP certificate. The interest rate of KVP is lower compare to that of Public Provident Fund (PPF), National Savings Certificate (NSC), and Fixed Deposits.

Liquidity: PPF is not a liquid investment. This means that you cannot easily sell your investment if you need cash in the short term. You can only withdraw money from PPF after 15 years, or only under certain circ*mstances. Partial withdrawals are permitted after the completion of five years.

After PPF, ELSS is one of the most tax friendly 80C investment options. ELSS capital gains of up to Rs 1 lakh in a financial year are tax free. Capital gains in excess of Rs 1 lakh are taxed at 10%.

Risk & Safety: NPS is market linked and a bit risky, but it is strictly regulated by the PFRDA so there is almost no chance of malpractices. PPF is entirely government backed so there is almost risk free returns. Returns: NPS can give up to 10% in some cases whereas PPF provides low but stable returns around 7-8%.

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Is NSC risky? ›

NSC investments are almost risk-free since they are backed by the Government of India. These investments offer one of the highest rates of return among the fixed income instruments.

As of August 2024, the PPF interest rate is 7.1% per annum, compounded annually. This rate is subject to change based on the government's quarterly review.

Corporate Fixed Deposit schemes offer higher returns on your investment, but choosing the right company is imperative. If you choose a good Company FD scheme, you will generally earn more on your investment than bank FDs as these schemes offer the highest interest rate on FD.

Individuals can diversify their portfolios with options like mutual funds, PPF, gold investments, REITs, and SIPs for potentially higher returns and protection against market fluctuations and inflation.

Public Provident Fund (PPF)

PPF investment has a lock-in period of 15 years. PPF is considered as one of the safest investments as sovereign guarantees back the scheme. Like bank FDs, PPFs offer a much higher rate of interest than a regular savings bank account.

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The NSC rate of interest is 7.7% p.a.

Both are used to make small-, medium-, and large-amount investments. While the NSC provides a 7.7 per cent annual compound interest rate, the return on a lump sum investment depends on the performance of equity, debt, or other investment options the scheme has invested its money in.