Yes, you can easily access the NPS account online via the eNPS portal. In addition, you can take part in several contributions online by using the eNPS portals of CRAs.
What is the Difference Between NPS and NSC?
The National Pension System or NPS is a scheme organised by the Indian Government for offering old age earning and social security to the citizens. On the other hand, National Savings Certificate or NSC scheme is an investment initiative which aims to provide savings and tax benefits to individuals.
Often, people get confused between NPS and NSC by considering them as same. However, both of these investment options have some differences. To know about NPS vs NSC in detail, keep reading.
What Is NSC?
What Is NPS?
What Are the Differences Between NPS and NSC?
The key differences between NPS and NSC are discussed below in the following table:
National Pension Scheme (NPS) is a long-term investment option for retirement. The scheme is governed by Central government and the PFRDA (Pension Fund Regulatory and Development Authority) The scheme was launched in 2004.
National Savings Certificate (NSC) is a fixed-income investment system, which you can open through any branch of post office. It is an initiative by the Government of India. Its term is 5 years which is also its lock-in period.
Who Can Invest
Employees working in government, private as well unorganised sectors can invest in the pension scheme. However, the armed forces are not allowed to invest here.
The National Savings Certificate (NSC) is open to all for investing in it.
Available under section 80C and 80CCD.
Available under section 80C (Up to the extent of ₹ 1,50,000)
High risk but comes with high return (percentage of return varies)
Low risk due to government backing. The return is fixed.
The rates of interest for NPS range between 9% and 12% per annum.
The rates of interest for NSC remain fixed at 6.8% per annum.
What Are the Benefits of NSC?
Tax BenefitsOne of the top advantageous factors of NSC is that it offers tax benefits since it is backed by the government tax-saving scheme. This helps you make a claim of up to ₹ 1.5 Lakh according to Section 80C.
Interest RateAt present, the interest rate offered by the National Savings Certificate (NSC) scheme is equivalent to 6.8% per annum, which is revised by the government at the end of each quarter. This interest rate is compounded yearly but can be payable only at maturity.
Minimum InvestmentInvesting in a National Savings Certificate is affordable to all classes of people in society. You can invest as minimum as ₹ 1000 the first time and thereafter increase the amount whenever it becomes viable for you.
AccessibilityThe NSC scheme can opt from any post office just after the submission of the required documents and completion of KYC verification. Thereafter, you can also transfer the certificate from one branch of a post office to another.
Loan SecurityFinancial institutions consider NSC as collateral for secured loans such as loans against property, home loans, etc. To do this, the concerned postmaster needs to put a transfer stamp on your certificate before sending it to the financial institution.
Premature WithdrawalIn general, an individual cannot exit a National Savings Certificate (NSC) early. However, it can be accepted only in the case of certain critical scenarios, such as the demise of an investor or any involvement of a court order in the process.
What Are the Benefits of NPS?
PortableThe NPS scheme features comprehensive portability across various jobs and across locations. It offers a seamless transitional arrangement for subscribers when that individual switches to either a new job or changes location.
NPS comes with an array of investment choices alongside pension funds (PFs) in order to plan prudently for the growth of investment and monitor the same. Being a subscriber, you have the option to switch from one investment choice to another or even from one fund manager to another if you are not satisfied with their performance. You will get this in both Tier I and II accounts. Details about these accounts are stated below:
- Tier-I Account: The Tier I account is a non-withdrawable fixed retirement account wherein the contributions you make periodically are invested and credited according to the fund manager or investment portfolio you choose.
- Tier-II Account: The Tier II account is a voluntary withdrawable account and being a subscriber, you can opt for it only if you have a prevailing Tier I account under your name. Here you can make your withdrawals as per your needs whenever necessary.
Well RegulatedThe NPS scheme is properly regulated by PFRDA and comes with crystal-clear investment rules, time-to-time monitoring, as well as performance appraisal of fund managers by the NPS Trust. Compared to different other pension schemes, the account maintenance charges under NPS are much lower.
Higher Returns and InterestCompared to various other traditional investment options for tax-saving, NPS enables you to get a much higher return on your investment. Over the earlier decade, it has offered annual returns of 9% – 12% which makes it a steady investment choice for you.
Tax BenefitsYou can claim a deduction up to the extent of ₹ 1.5 Lakhs towards your contribution (investment) in NPS. This also applies to the employer's contribution. For a salaried employee, one can claim a deduction of a maximum of 10% of their salary under Section 80CCD (1) of the Income Tax Act, while for the self-employed, there is a limit of 20% of their gross income.
Exit Rule and Opportunity of Premature WithdrawalAs a pension scheme, it is vital for you to invest till you become 60 years old. However, if you are investing for a minimum of three years, you can withdraw an amount of up to 25% whenever necessary. These comprise children’s marriage or education, owning a house, medical treatment, etc. You may withdraw up to three times during the entire tenure. These restrictions are only available in Tier I accounts.
NPS vs NSC - Which One Is Better?
Both NPS and NSC are investment instruments that offer tax benefits. Your choice of investment will depend on your financial requirements. While comparing between NPS and NSC to find a suitable one where you should invest, it is important to note that both investment options come with advantages and drawbacks.
- The National Pension Scheme or NPS is fairly a long-term investment (you need to continue investing in it till you reach 60 years) and intended to ensure old-age earnings in the form of a pension. Since the National Pension Scheme or NPS carry exposure to equity, they are vulnerable to market volatility. However, they offer high returns too. Investing in NPS is best for investors who want to secure their old-age earnings after retirement but do not hesitate to take a bit of risk to get higher returns.
- On the contrary, National Savings Certificate or NSC is a fixed-income plan backed by the Indian Government and so it has an assured rate of return alongside complete capital security. So, investing in NSC is the best choice for people who are unwilling to take a risk and remain happy with a steady and get assured return after five years. Finally, both investment schemes are regulated by the Government of India and come with tax benefits.
Now, after having gone through the comparison chart and the above discussions you can decide the investment option that suits you the best.
Having a crystal-clear idea about NPS vs NSC from the above discussion will help you to choose the best investment option for you. However, keep in mind that although both of them are managed by the Indian Government, they have some differences in their rules and regulations. So, make sure that you go through each of them carefully and take your decision prudently.
FAQs About NPS vs NSC
The National Savings Certificate or NSC was launched on 19th November 1998 by Atal Bihari Vajpayee, the 10th Prime Minister of India.
Being an Indian citizen, whether resident or non-resident, the ideal age to opt for NPS investment ranges between 18 years and 60 years.
At present, there are eight noteworthy pension fund managers of NPS as mentioned below:
- Aditya Birla Sun Life Pension Management Limited
- LIC Pension Fund.
- UTI Retirement Solutions Limited.
- Kotak Mahindra Pension Fund Limited.
- ICICI Prudential Pension Funds Management Company Limited.
- SBI Pension Funds Private Limited.
- HDFC Pension Management Company Limited.
- Reliance Pension Fund
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- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.