Introduction
When choosing tax-saving investments under Section 80C, two popular options are the Public Provident Fund (PPF) and the National Savings Certificate (NSC). Both are backed by the Government of India, offer safe returns, and help you save up to ₹1.5 lakh in taxes. But they differ in lock-in period, returns, liquidity, and suitability.
🔍 What Is PPF?
- Full Name: Public Provident Fund
- Lock-in Period: 15 years (extendable in 5-year blocks)
- Returns: ~7.1% (tax-free)
- Risk Level: Very Low
- Tax Benefit: EEE (Exempt-Exempt-Exempt) — no tax on investment, interest, or maturity
- Best For: Long-term savers, retirement planning
👉 PPF is ideal for building a retirement corpus with guaranteed, tax-free returns.
🔍 What Is NSC?
- Full Name: National Savings Certificate
- Lock-in Period: 5 years
- Returns: ~7.7% (taxable)
- Risk Level: Low
- Tax Benefit: Interest is taxable, but reinvested interest qualifies for 80C
- Best For: Medium-term savers, conservative investors
👉 NSC suits those who want safe returns and shorter lock-in compared to PPF.
📊 Comparison Table
| Feature | PPF | NSC |
|---|---|---|
| Lock-in Period | 15 years | 5 years |
| Interest Rate | ~7.1% (tax-free) | ~7.7% (taxable) |
| Tax Treatment | EEE (fully tax-free) | Interest taxable, reinvested interest qualifies for 80C |
| Liquidity | Partial withdrawal after 7 years | No premature withdrawal allowed |
| Risk Level | Very Low | Low |
| Best For | Long-term retirement savers | Medium-term conservative savers |
💡 Key Differences
- Returns: NSC offers slightly higher returns, but they’re taxable. PPF returns are lower but completely tax-free.
- Lock-in: PPF has a longer lock-in, but you can extend and build a long-term corpus. NSC is better for short-term goals.
- Tax Efficiency: PPF wins with EEE status — no tax at any stage. NSC interest is taxable unless reinvested.
- Liquidity: PPF allows partial withdrawal after 7 years. NSC is locked for full 5 years.
🧠 Which One Should You Choose?
Choose PPF if:
- You want long-term, tax-free growth
- You’re planning for retirement
- You prefer compounding over decades
Choose NSC if:
- You want safe returns with shorter lock-in
- You’re investing for medium-term goals
- You’re okay with taxable interest
Conclusion
Both PPF and NSC are excellent tax-saving tools under Section 80C. If you’re building a long-term financial foundation, PPF is unbeatable with its tax-free compounding. If you want safe returns in 5 years, NSC is a solid pick. You can even invest in both to balance liquidity and long-term growth.