PPF vs EPF vs NPS vs mutual funds: Guide to your pension plans

 Public Provident Fund (PPF), National Pension System (NPS), Employees Provident Fund (EPF), and mutual funds are some of the options you can opt for while planning for pension.

Savings for retirement and pension plans are essential even as one needs to look after immediate goals such as children's education and buying a house or flat. However, one must become proactive while charting out a retirement plan to ensure that there won't be any lack of funds.

The question often arises is where to invest the hard-earned money. The Public Provident Fund (PPF), National Pension System (NPS), Employees Provident Fund (EPF), and mutual funds are some of the options you can opt for while planning for pension.

PPF INTEREST RATE, INCOME TAX BENEFITS

PPF is considered as one of the safest avenues for saving as it offers guaranteed and income tax-free returns.

PPF also offers Rs 1.5 lakh deduction on the investment under section 80C of the Income Tax Act.

Currently, PPF offers an interest rate of 7.1 per cent.

A PPF account is for 15 years but one can continue it for five years.

The maximum amount one can invest in a financial year is Rs 1.5 lakh.

NPS INTEREST, TAX BENEFIT

The National Pension System (NPS) is another income tax-efficient retirement savings scheme.

Along with Rs 1.5 lakh deduction on the investment under section 80C of the Income Tax Act, the NPS offers an extra deduction of Rs 50,000 under section 80CCD (1B) of the Income Tax Act.

NPS comes with a lock-in period as one can withdraw only 60 per cent of the total funds tax-free at the age of 60.

However, pension is a taxable income in the hands of the recipient.

EPF INTEREST RATE, BENEFITS

Employees' Provident Fund Organisation (EPFO) offers 8.1 per cent interest rate on the provident fund.

One can reap the benefits of EPF by letting it grow and avail the compounding.

MUTUAL FUNDS

Mutual funds are considered one of the best options for long-term savings goals like retirement.

One can park their money in mutual funds through a systematic investment plan (SIP).