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馃敶NPS vs PPF馃煝 | Which is a BETTER retirement plan? LLA NPS Ep#2 Financial Advice - YouTube
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Welcome to yet another episode of
Labour Law Advisor
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My name is Mandeep, and I have regrets
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What I mean by regrets is that we have
on this channel, in the past,
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EPF, PPF, FD, KVP(Kisan Vikas patra)
and Sukanya Samriddhi Yojana
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All have been covered. But in haste, I forgot
to cover one important thing
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And that is NPS
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Because NPS is a really good
retirement option
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So a few days back, during this
lockdown when I was sitting idle at home
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It struck me that I have not
made a video on NPS
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Hence I quickly decided to wash
off my sins and make an in-depth video
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Which by the way you can get it
in the card or the description
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If you have already seen that video,
I had made a promise that
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NPS is a vast topic
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And it is not possible to cover
it all in just a single video
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So, this is the second video
in the NPS series in which
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I will show you the comparison
between PPF and NPS because
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Both of them are great retirement
plans, Both have a lock-in period
[59]
Both are used for investment, both
give you a large sum on maturity
[64]
With this video, you will
know the comparison
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That whether an NPS is better
or a PPF is better
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But, if you think that NPS
is better for you
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Then I would request you to please watch
the first video of NPS after this video
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Because we are only going to see
the comparison in this video
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And not the in-depth features
of NPS
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If you have already made the decision
that you want to invest in an NPS then
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You should definitely watch the first
video or if you have made a decision
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After watching this video that a PPF
will be more suitable for you
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Then an in-depth PPF video is also available in
the description which you should check out
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Also, an important request which I want to
make before the end of the video
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If after the video you feel that I have
given you any knowledge that too free of cost
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Then please hit the free of cost
like button as it motivates me a lot
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So let's start with it!
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[Intro Music]
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In a very "easy to understand" language I have
prepared a comparison between PPF and NPS
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This comparison will also be available on
the Instagram handle of Labour Law Advisor
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Which you will be able to save
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So, even if you forget or are lazy to watch the
video again you can access it from there
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Firstly, let's talk about the eligibility
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To invest in a PPF it is compulsory to be an
Indian citizen and there is no age limit
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You can even open a PPF account despite
of being a minor
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But under NPS there is an age limit
between 18 and 65 years
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Also, an Indian citizen or an NRI can
get an option to open this account
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The minimum deposit for both the options
is of Rs.500 annually
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The maximum investment in a PPF is of
Rs.1,50,000 per annum
[168]
But in an NPS there is no limit. You can invest
your entire wealth in an NPS if you wish to
[173]
But please don't do that
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Now let's talk about the returns where
things get really interesting
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And I'll keep this in the concluding point when
I'll tell you which scheme is better
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The return on PPF is an interest that is
revised every quarter
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The interest in the current quarter is
7.1%
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You might think this is really low and in-fact
it is
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Looking at the historic data the PPF rate has also
been above 8% consistently
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The economy itself is down due to the lockdown and
coronavirus. Due to which the interest rate is low
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And not only in these, currently in other investment
schemes also the rate of return is low
[213]
But if things would have been normal, it would be
reasonable to assume that the PPF rate is close to 8%
[218]
If we speak about NPS, the amount deposited in NPS is
also invested in the stock market
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This means the scope of your return also increases
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Along with the increased return, there is
a slight increase in the risk as well
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But not much because if you have seen the old video
of NPS, I had said that as an NPS subscriber
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You have an option to allocate how much percentage of
your funds will go into the stock market,
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How much percentage will go into government bonds,
how much percentage will go into corporate bonds
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And how much percentage will go in other
alternative investments
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If you are not able to choose this, then you
can also select the auto-choice option
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The bottom line is that, if your deposited money
in the NPS gets invested in the stock market,
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Then obviously it would fetch you
the market dependent returns
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Where your scope to earn a higher return increases
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If you look at the trend of last 10 years,
then NPS has given a return of 8-10%
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Which is greater than PPF
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If we talk about the lock-in period,
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Under PPF you will have to compulsorily lock
in your money for 15 years
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It is even more difficult under NPS where you
have to lock in your money till the age of 60
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If I give my example, I'm 25 years old
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I don't look 25 years because of the beard.
But trust me I'm 25 years old
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If I open a PPF account at the age of 25,
then after 15 years which is at the age of 40
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I can withdraw the entire amount of PPF
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But, I'll have to run the NPS account for
35 years to withdraw the money from the NPS
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If we talk about fund management, once you
have deposited the money in PPF,
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After that, you will have no control
over that money
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You can not select where all you
want to invest that money
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The PPF authority invests the money as
per their discretion
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And as per the interest, the same will
get credited to your account
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But if we talk about NPS, then you have
control on your money
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This means the four areas which I have told
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(1) equities, (2) corporate bonds, (3) government bonds
and (4) alternative investments
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You can select how much percentage of your money
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You want to put in stock markets, bonds
or alternative investments
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If we talk about the tax benefits,
both have tremendous tax benefits
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PPF comes in the exempt, exempt, exempt category
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This means the contribution which you
will make in one year,
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Will be deducted from your income Under
Section 80C
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On that income, you will not have to
pay any tax
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And the interest which will get
credited on your PPF every year,
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It will not be considered as part of your income.
This means you will not have to pay tax on it
[366]
After maturity when you will withdraw from the
corpus, still you will not need to pay any tax
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Which means, exempt, exempt, exempt
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Now if we talk about NPS, it is
exempt, exempt, almost exempt
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This means the contribution you made
is exempt and no need to pay any tax
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You can claim deduction Under Section 80c
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Infact, you can calim an additional deduction
of Rs.50,000
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This means you can take a total
deduction of Rs.2 Lakhs
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The money which you'll earn on that
return will be tax-free
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At last, even on withdrawal, you do not
have to pay any tax
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But
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National Pension Scheme, as the name
suggests, has the word pension in it
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This means after your withdrawal every month
you will be entitled to a pension
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The monthly pension will be taxable
rest everything is tax-free
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If we talk about the extension
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Half the population says that
the 15 years or the age till 60
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Lockdown. I'm saying lockdown
again and again
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Lock-in period!
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Is not suitable for them
They need the money quickly
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And few people want to even keep the
money for more than 15 years
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Or want to keep the money even past
the age of 60 years
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Under PPF, if you want to extend it for
more than 15 years
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Then you can take an unlimited extension
of an additional 5 year period
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For eg. Extend it for 5 years and then again
extend it for 5 years if you wish to
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Under NPS, if you don't wish to withdraw by
the age of 60
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then you can extend it till the age of 70
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There is one more catch in this
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Either you extend it till the age of 70
and pay the contribution every year
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Or else you can get it deferred
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This means based on how much ever
you have contributed till now,
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10 years you'll just enjoy the returns on it
but you don't wish to contribute any further
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In that case, you can defer it
for 10 years under NPS
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Like I said there are 2 types of people
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The first type of people who do not want to
wait for 15 years or till the age of 60
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Or for any reason, they have to withdraw
their money prematurely
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Premature withdrawal is allowed in PPF
only after 6 years of regular contribution
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After the contribution of 6 years, you can
withdraw 50% of the deposited money
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In NPS, after 3 year's contribution itself
you can withdraw 25% of your deposited money
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Now when I said "your deposited money",
That is in the literal sense
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Because in NPS, your employer also
contributes on your behalf
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So you will not be able to withdraw the
employer's contribution
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Whatever you have contributed yourself
can be withdrawn up to 25%
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After the regular contribution of 3 years
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In your life, you will only get a
chance to withdraw up to 3 times
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And instead of tier 1, you have a tier 2 account
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NPS has 2 types of accounts. If you don't know,
this means you have not seen the first video
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And this has hurt me. Please watch it.
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So, in NPS, instead of tier 1 you have a tier 2 account
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So you can withdraw how much ever and whenever.
There is no limitation in that
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But there is a catch in that
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You will not get any tax benefit in that tier 2 account
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Watch the entire video for further information
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Let's talk about the withdrawal on maturity
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Under PPF, you can withdraw the entire amount
on maturity which is tax-free
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If we talk about NPS, you can withdraw
maximum of 60% of your total fund
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For the remaining 40%, you will have to
compulsorily purchase an annuity
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This means you'll have to purchase an
annuity from an insurance company
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And that insurance company will give you
a monthly pension lifelong
[569]
If we talk about fund management,
it is free under PPF
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This means you deposit the money
and you earn interest on it
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The entire interest is yours and no
money is deducted from it
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But under NPS, you'll have to give a
fund management fee of 0.01%
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Which is not a lot. Under Mutual Funds,
it even goes up to 1.5%-2%
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1% expense ratio is considered to be
a very good expense ratio
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Here, 0.01% is your fund management fee
which is negligible
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Also the details of account opening charge,
transaction charge etc. is on your screen
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You can either pause and read it
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or I'll be posting this on Instagram where you
can directly save it and access it whenever
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If we talk about security, then PPF
has the highest security
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Compared to other saving schemes or investment schemes
in this country, PPF is the most secured
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Ask why?!
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I'll tell you!
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Assume you are in a court case and the
court has imposed a hefty fine on you
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And your personal properties are also
attached to the case
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And you have a PPF balance of 10 Lakhs
or 15 Lakhs still no one can touch it
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Not even the court!
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But, for the other things the court
can definitely attach
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In that aspect, the highest security that
you get on your money is under PPF
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Although, NPS is also secure but bears in mind
what type of security I'm talking about
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Which you get it only on one instrument
in this country
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if I talk about the risk point, then obviously
I'll put PPF under the no-risk category
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Because you already know how much interest you're
going to earn and no one can seize that money
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Hence, this is not risky
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But this doesn't mean NPS is riskier
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It is considered as one of the lowest
risk investments
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Even if your money is invested in the
stock market or the government bonds
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But, as your age increases the equity
investment starts declining
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So that your risk exposure decreases
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You'll not be allowed to invest in equity
more than the prescribed percentage
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If we talk about the account opening, the
differences between the two are not major
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Both the accounts can be opened
by visiting the bank
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PPF account can be opened through a
post office as well
[698]
NPS account can be opened online through
the eNPS website which I would recommend
[704]
From there you will get your
PRAN (Permanent Account Number)
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Which is equivalent to the UAN number
we get under PPF
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All your contributions will be
mapped under that
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You can go to the online portal and
deposit your contributions as well
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In fact, you can also open your PPF account
on various other banks websites
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The final point of differentiation
is the "Employer Contribution"
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Because you have seen a lot of our
EPF videos and you know that
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In an EPF an employer and an
employee, both contribute
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This option is available under NPS as well
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If you want, you can ask your employer to
contribute to your NPS
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The employer can make an equal or
an unequal contribution
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The employer can also make a zero contribution
and the employee can make their own contribution
[748]
PPF does not have this facility. You only
contribute for yourself under PPF
[753]
In fact, under NPS as well mostly people
contribute for themselves only
[756]
But, this is an option which I'm telling
[758]
Since you have seen the comparison I would like
to give my opinion whether NPS is better or PPF
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NPS is better!
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Why is it better? I'll explain with an example
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I'll take my example. Assume I'm 25 years old
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Let's not assume. I am 25 years old
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At the age of 25 years, I invest Rs.1 Lakh
every year in PPF
[778]
Monthly it will be Rs.8,333/-
[781]
Let's round it off and take Rs.8000/-
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The monthly investment I'll make is Rs.8000/-
[785]
Investment period I'll keep it as 35 years
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Now you'll say that "PPF has a maturity of 15 years"
[790]
Yes, but with the extension of 5 years I can
try and pull it till the age of 60
[795]
Why because I want to compare and show you
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If you keep the money for the same duration in both
the schemes, then how much will be the difference
[802]
So, we have kept it for 35 years
[803]
Rate of return I'll keep it as 8%
[805]
Why 8%? Because 7.1 % is due to the
bad condition of the economy
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which will gradually change as recovery comes
[814]
So, as per the historic data, I'll take 8%
[817]
After calculating, Rs.33,60,000/- will be
the amount I would have invested
[822]
The interest earned on that would be Rs.1,45,05,806/-
[826]
And total I would receive is Rs.1,78,65,806
[831]
With which I can enjoy my retirement
[833]
Now if the average return under NPS is 10%
[837]
I'll change the 8% to 10% and now let's
see the difference
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See, before you were getting Rs.1,78,65,806/-
and now you are getting Rs.2,86,20,173/-
[846]
Rs.1,78,65,806/- under PPF,
and Rs.2,86,20,173/- under NPS
[850]
Ony because of the difference of 2%
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Let me tell you an interesting thing
[854]
Remove 60% of Rs.2.86 Crore.
How much is it?
[858]
Rs.1.71 Crore
[859]
For Rs.1.71 Crore you will be given an option
to withdraw during the maturity of NPS
[864]
Along with that your pension would also
start with the remaining amount
[868]
If you invest in PPF, in totality, you will
get an option to withdraw only Rs. 1.78 Crore
[875]
And there won't be any pension as well
[876]
So, what is a better option for you?
[879]
Of course, NPS as you will be able to
generate a greater sum
[883]
60% itself would be almost equal
to the 100% of PPF which you can withdraw
[887]
And for the remaining money,
you can start your pension as well
[890]
So obviously NPS is a better choice but still
I have shown you the comparison because
[894]
It is possible you like PPF more so you
can watch the PPF video
[898]
Or if you have liked NPS more then you
can watch the NPS video
[902]
If you want to invest in any one of the schemes
[905]
Then, without watching both the
in-depth videos you should not invest
[908]
And if you have liked this video
then please hit the like button
[911]
Subscribe to our channel and also
hit the bell icon
[915]
Because you wouldn't want to
miss such important videos
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