Regular post-retirement income | Additional tax benefit on investments up to ₹50,000 u/s 80CCD (1B) - EEE Category | Regulated by PFRDA (Pension fund regulator under Ministry of Finance, Govt. of India) Invest Now

For salaried people, creating a retirement portfolio after a certain age is crucial to safeguarding their financial future. The Government of India provides two savings programmes, the National Pension Scheme (NPS) and Public Provident Fund(PPF), to assist such individuals. Both are long-term savings instruments that offer tax advantages.


The NPS vs PPF debate has been going on for a while now. A comparison of NPS vs PPF will help you choose the best option and make the right investments.


The Indian government established the National Pension System (NPS), a market-linked pension savings vehicle. The success of the market and pension fund management has an impact on the NPS returns, just like it does with mutual funds. Public Provident Funds (PPF), on the other hand, are backed by the government and offer fixed returns that are determined by the government on a quarterly basis. While the PPF can be used for a variety of purposes, NPS is a financial instrument designed specifically for retirement. 

Who Can Invest in PPF?

The PPF is open to all Indian citizens. Unless the second account is in the name of a minor, a citizen is only permitted to have one PPF account. A PPF account cannot be opened by NRIs or HUFs.

Who Can Invest in NPS?

Any Indian citizen who is between the ages of 18 and 60 are eligible to apply for the NPS. The account holder must adhere to the Know Your Customer (KYC) regulations.

Key Differences Between NPS and PPF

Here are the major differences between NPS and PPF:

Key Features




Indian citizens between the ages of 18 and 60 can open an NPS account.

Any resident of India. In addition, one can open a PPF account in their minor children's names and benefit from tax advantages.

NRI Eligibility



Interest Rates

Approximately 12-14%

Approximately 7-8%

Maturity Period

The maturity time frame is flexible. With the opportunity to invest further until the age of 70, the NPS account accepts contributions up until the age of 60.

The maturity of a PPF account is 15 years. Additionally, after 15 years, this tenor may be extended by a block of five years with or without additional contributions.

Investment Limit

The required minimum contribution is Rs.6,000.As long as your contributions don't exceed 10% of your gross annual income, or 10% of your gross total income if you're self-employed, there is no contribution cap.

Minimum Rs. 500 every year, with a Rs.1.5 lakhs cap on the overall. There can be a maximum of 12 contributions per year.

Tax Benefits

A tax credit is only payable on up to Rs. 1.5 lakhs under Section 80CCD (1) of the IT Act and an additional Rs. 50,000 under Section 80CCD(2), for a total of Rs. 2 lakhs.

Every PPF deposit is tax deductible u/s 80 C. The collected funds and interest are also tax-free when the money is withdrawn.

Is partial withdrawal/premature withdrawal allowed?

After 10 years, account holders may, under certain conditions, take partial and early withdrawals of funds. However, in order to take an early retirement, one must invest at least 80% of the corpus in a life insurance annuity.

Partial withdrawals are allowed after the seventh year, albeit with some limitations. There are several limits, however loans are permitted between the third and sixth fiscal years after account opening.

Can I choose how to invest my money?

Yes, you may choose between government securities funds,equity funds, other government securities and fixed instruments.



Interest rates are influenced by the market. Consequently, the prospective benefits are higher.

Government entities determine interest rates.


You must buy an annuity at maturity that is worth at least 40% of the corpus, unless the maturity sum is less than Rs.2 lakhs.


NPS vs PPF: A comparison

  • Risk And  Safety

NPS is somewhat risky because it is market-linked, but because the PFRDA tightly regulates it, there is almost no chance of fraud. PPF offers nearly risk-free returns because it is fully supported by the government.

  • Returns

When it comes to returns of NPS vs PPF, PPF offers low but consistent returns of about 7-8%, whereas NPS can sometimes offer up to 10%.

  • Liquidity

Since NPS offers more chances for partial withdrawal, it has a marginally higher liquidity. However, PPF permits partial withdrawal after a certain amount cap and lock-in time. Keep this in mind while comparing NPS vs PPF.

  • Taxes

Annuities must be purchased after taxes have been paid, however NPS balances released at maturity are tax-free. PPF falls under the exempt-exempt-exempt (EEE) classification.


NPS or PPF - Which is better? Both have favourable tax treatment. As more equity exposure is likely to produce higher returns and mandatory investment in an annuity secures retirement income, NPS is a preferable alternative if your goal is to save for retirement. But because the entire corpus can be withdrawn at maturity, PPF serves the purpose better if you want to save for your child's education or marriage. Make sure to do your own research before choosing NPS or PPF.

Frequently Asked Questions

Can I invest in both PPF and NPS?

You can invest in either PPF or NPS if you want to increase your retirement plan's contributions.

Are NPS tax-free when they mature?

Subscribers to these plans have the option of making a 40% lump sum withdrawal at maturity that is tax-free. The maximum lump sum withdrawal is 60%, and any amount over 40% will be taxed.

What is the difference between NPS and PPF?

Section 80CCD (1) and 80CCD allow for a maximum tax advantage of Rs.2 lakhs for NPS (2). PPF deposits, on the other hand, provide tax exemption under Section 80C.

Can my PPF account be extended for an additional three years after it matures?

No. Extensions are only possible in 5-year increments.

Can my PPF account be transferred to another branch or office?

Yes. You can move your PPF account to a different branch or office.

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