PPF vs NSC

When we carried an earlier piece on PF vs PPF: What's the difference?, we were 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 National Savings Certificate.

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

How much goes in?

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

With NSC, the minimum amount is Rs 100. Here, is no upper limit on investment.

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

What do I get?

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

The only difference is in the way it is computed. PPF is compounded annually. NSC is compounded half-yearly (twice a year).

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

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