Confused between PPF and NPS? Learn the key differences, pros, cons, and which scheme suits your retirement goals better.
đź’¬ Introduction: Old Trust vs New Power
If you’re serious about building a secure retirement fund in India, you’ve probably heard of PPF (Public Provident Fund) and NPS (National Pension System).
Both are government-backed, both offer tax benefits, and both help you grow money long-term.
But they serve different purposes — and choosing the right one can impact your financial freedom.
In this guide, we break down PPF vs NPS across returns, flexibility, tax savings, risk, and more — to help you pick what suits you best.
1.
Quick Overview
| Feature | PPF | NPS |
| Purpose | Safe long-term savings | Retirement corpus + pension |
| Managed By | Govt of India | PFRDA-regulated fund managers |
| Tenure | 15 years (extendable) | Till age 60 (can extend to 70) |
| Investment | ₹500–₹1.5L/year | ₹500/month (no upper limit) |
| Returns | Fixed ~7.1% p.a. | Market-linked (8–12% avg) |
| Risk Level | Zero risk | Moderate risk (can opt equity <75%) |
| Withdrawals | Partial after 7 yrs | Partial after 3 yrs (specific cases) |
| Pension | No | Yes (Annuity after retirement) |
2.
Return on Investment
- PPF: Fixed rate declared quarterly by the government.
Current rate: ~7.1% p.a. - NPS: Returns vary with asset mix.
Historical average:- Equity: 10–12%
- Debt: 7–9%
- Mixed (auto-choice): ~9–10%
Verdict:
- Choose PPF for safety and guaranteed returns
- Choose NPS if you can take some risk for higher wealth creation
3.
Tax Benefits: Which Saves More?
Both offer great tax advantages.
| Tax Section | PPF | NPS |
| 80C | Up to â‚ą1.5 lakh | Up to â‚ą1.5 lakh (combined with 80C) |
| 80CCD(1B) | Not Applicable | Extra â‚ą50,000 deduction (over 80C) |
| Maturity Tax | Fully Exempt (EEE status) | 60% tax-free, 40% annuity (taxable) |
| Tax Section | PPF | NPS |
| 80C | Up to â‚ą1.5 lakh | Up to â‚ą1.5 lakh (combined with 80C) |
| 80CCD(1B) | Not Applicable | Extra â‚ą50,000 deduction (over 80C) |
| Maturity Tax | Fully Exempt (EEE status) | 60% tax-free, 40% annuity (taxable) |
Verdict:
- NPS wins for those looking to save more tax beyond 80C limit
- PPF offers better post-retirement tax treatment (fully tax-free)
4.
Lock-in and Liquidity
- PPF:
- Lock-in: 15 years
- Partial withdrawal after 7 years
- Loan facility after 3 years
- NPS:
- Lock-in till age 60
- Partial withdrawal up to 25% after 3 years (limited reasons)
- Annuity purchase mandatory (40%) at exit
Verdict:
- PPF is more flexible if you need access before 60
- NPS is stricter but more focused on long-term discipline
5.
Pension Benefit After Retirement
- PPF: No pension or annuity — you manage your own corpus
- NPS: Requires 40% of your corpus to buy an annuity, ensuring regular post-retirement income
Verdict:
- If you want pension-like monthly income, NPS is the clear winner
6.
Risk Profile: Safe or Growth-Focused?
- PPF: No market exposure — 100% government-secured
- NPS: Equity exposure (max 75%) introduces volatility but enables growth
Verdict:
- Choose PPF if you’re risk-averse
- Choose NPS if you have a long horizon and can ride market cycles
âś… Summary: Which Should You Choose?
| Scenario | Best Option |
| Low risk, guaranteed savings | PPF |
| High tax savings (up to â‚ą2L/year) | NPS |
| Pension after retirement | NPS |
| Flexible withdrawal & loans | PPF |
| Long-term high returns (10+ years) | NPS |
| Already maxed 80C, want more saving | NPS (80CCD 1B) |
✍️ Final Verdict: Why Not Both?
PPF + NPS is a smart combo:
- Use PPF for ultra-safe growth
- Use NPS for disciplined retirement building and higher tax savings
You’ll get:
- Guaranteed + market-linked returns
- Liquidity + long-term pension
- Max tax benefits under 80C + 80CCD(1B)
