PPF Vs NSC

Whenwe carried an earlier piece on PF vs PPF: What's the difference?, wewere flooded with mails telling us to do a piece on PPF vs NSC.

This is what we attempt to do here.Explain the difference between the Public Provident Fund and the NationalSavings Certificate.

The NSC is a post-office savingsscheme while the PPF was established by the central government in 1968. Butboth are very safe since they are backed by the government.

How much goes in?

The minimum amount you have toput into your PPF account in a year is Rs 500. The maximum you canput is Rs 70,000 per year.

With NSC, the minimum amount is Rs100. Here, is no upper limit on investment.

However, NSC is sold indenominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000. So, if youwant to invest Rs 30,000, you will have to buy three certificates of Rs 10,000each.

What do I get?

On the face of it, both give anidentical rate of interest: 8% per annum. Or so it seems.

The only difference is in the way itis computed. PPF is compounded annually. NSC is compounded half-yearly (twice ayear).

Let's say on April 1, 2006, youinvested Rs 30,000 in PPF and the same amount in NSC.

On April 1, 2007, your PPF accountwill have Rs 32,400 while your NSC will have Rs 32,448.

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PPF Vs NSC